Issue 11 • April 2008 

April Newsletter

In this issue we discuss last minute tax tips, active vs. passive investing and estate planning.

Tax tips :

No one likes owing the IRS, but it gets even more scary when you recieve that certified letter in the mail stating you underpaid by a significant amount. One of the biggest culprits is failure to list the cost basis of each security sold on your 1040. The IRS only recieves the "sell" amount of the transaction from the 1099's, so by default if you don't tell the IRS what you paid for the stock they assume it is all profit.

This often happens with Employee stock purchase plans or Employee Stock Option accounts. Make sure you don't overlook these reportable transactions on your return. More than likely the custodian withheld the standard 20% federal taxes on the gain, but you still need to report to the IRS your cost basis.


Active vs. Passive Investing:

The investing world is divided into two camps: those that believe in Active investing strategies vs. the Passive or indexing followers.

Active management is the belief that the right fund managers can outperform their benchmarks. The Active crowd believes that the markets are inefficient and that securities can become mispriced.

Passive management is the belief that overtime the indexes always trump active strategies. The indexers believe that the markets are more efficient and that a low cost index strategy fund wins out over most actively managed funds.

I see value in both strategies and believe a combination can work to most clients advantage. My case for Active strategies is that I believe that the markets can at times be very inefficient (remember we are talking about extreme human emotions at play: greed and fear). In trending markets an indexing approach seems to work fine, in a volatile or choppy market it helps to have a more active bias.

Estate Planning :

Ancillary Probate: For those with realestate in more than one state (outside your state of residence), you should talk with your estate attorney regarding ways to avoid ancillary probate.

Why? When you die your Will is probated in your state of residence. For each state you own property in (outside your state of residence) your family will have to endure the expense of another probate. One often overlooked item that causes problems is Time Shares. If you have a time share ownership in Florida, Mexico or any other tropical location it could cause your family some added expense once you pass away. There are ways to avoid this and your estate attorney can show you how.



James A. Daniel,

This newsletter if for informational purposes only. The information contained within should not be considered as financial advice nor soliciation for financial services. Consult with your financial professional if you have any questions.

The Advisory Firm, LLC is a fee-only financial planning company and registered investment advisor.

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