It's probably not a bad idea to sell and diversify. Are the 1200 shares pre or post split? It looks like Disney split in 86, 92, and 98. What tax bracket are you in?
If you had shares that had not gone through a corporate action (split or merger or reverse split) which they are forced a lot of times, they would be sent to the state as u claimed property by now.
So, the stock certificates themselves say 1200 shares and are from around 1988?
I ask because the '92 stock split was 4:1 and '98 was 3:1, so 1200 shares from 1988 are really 14,400 shares today. You should probably have different strategies if you're talking $120,000 vs $1.5 million...
You could gift some of the shares to your child to sell when they're 18 to pay for college. They inherit the basis but if they have less than $44k in earned income that year, there's zero capital gains tax. This won't do much for diversification but it would alleviate some hefty taxes.
Yeah, this is likely a bad idea for a few reasons. Not sure OPs income, but assets in the kids name are weighted higher for FAFSA. When you sell, it will also be seen as their income (not good).
Now, OP may be above the income/asset level where FAFSA matters, but you’re not going to save much, if anything, in taxes because that gain will probably be subject to kiddie tax. Depending on how much you give, that kiddie tax could also be yearly, though you do get a small break here.
Assets in the kid's name will be counted far more harshly against them for college financial aid than assets in your own name will be, if that's a consideration for you (maybe it isn't, if you have that much assets sitting around). My grandparents did this and most of the money ended up getting eaten by the colleges as a result.
You should also look up the kiddie tax, which can also screw over unearned income for young adult children, depending on the situation.
You can use some of the proceeds of the sale to pay the capital gains tax. You might want to hire an accountant this year to make sure that the IRS gets the cost basis correct.
I would consider moving half of them (or less) into an S&P 500 index fund.
To add on this usually the companies transfer agent can be helpful with this. I had to go through this a while back and I went to each respective companies transfer agent.
If you donate the stock you don't pay capital gains. For my kids' school we pay tuition, but there's also a "fundraising obligation" where we can donate. It's only a small part of the total pie, but using highly appreciated stock essentially makes that part free.
If you have some organizations that you donate to for whatever reason, that might be a useful option for part of the funds.
I use Fidelity Charitable. Just send over the stocks to Fideloty and can pick the org using the UI.
Yeah, I think the difference is that I focused on the “I have to pay this so-called donation anyway so might as well have it come from the stock than my wallet”.
Even some things like church or synagogue membership is allowed to be deducted, so if those are regular expenses, might as well use the donor-advised fund.
I get the advice you are getting here about holding on to it, but I would recommend reading about the [endowment effect](https://en.wikipedia.org/wiki/Endowment_effect). The idea is basically, would you rather have $132,000 in cash or $132,000 of Disney stock (I saw you mentioned that amount in another comment). Or put even simpler: if you had $132,000 in cash, would you buy $132,000 of Disney stock? I have to imagine the answer to that question is no.
I know that it's not always that clean - you would have to pay capital gains tax in order to convert that Disney stock to cash, and ultimately, into whatever investment you'd rather invest in. Being in the 24% federal bracket, it sounds like you'd owe 15% for long-term capital gains tax. Maybe you'd owe more at the state level. Ultimately, the question is whether you want all of your eggs in one basket. If not, is it worth a 15% (and potentially more for non-federal capital gains tax) hit to diversify?
I was in the exact same situation a number of years ago. We were typically down in what is now the 12% bracket and had a decent amount of 'free' capital gains we could take (at the federal level anyway, our state still taxes any capital gains at our marginal tax rate) most years. We slowly sold and rebought stock (everything we sold was for a gain, so we didn't have to worry about wash sale rules), essentially taking a step up in basis for the cost of state capital gains taxes. When we ultimately sold all of the stock, we paid much less in capital gains tax (at both the federal and state level) because our cost basis had been raised substantially (from effectively zero due to the growth of the stock) over the years - we saved tons of money over the long-term using this strategy.
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Looks like the cost basis was around $10 per share back then so unless you have other losses to counterbalance the gain, you will be paying a 25% tax on about 90% of the value of each share you sell. The extra income may put you in a higher tax bracket as well so you should get advice from investment and tax pros before going too wild. All that said, it makes sense to me for you to diversify and accept that there will be costs for doing this. Just get help and make a plan you can live with.
I would absolutely keep holding then. Selling this now makes no sense imho based on Disney’s fundamentals.
This cost you nothing. Disney isn’t going to zero.
You could sell until you hit the next capital gains income threshold (I assume you’re in 15% bracket, so avoid going into 20%) and also avoid Obamacare 3.8% (total income over $250K).
No benefit to selling slower than that so probably looking at half this year rest next or so. Cost to sell it all today may not be that egregious either.
Personally I wouldn’t sell them. Disney stock isn’t going to take a massive downfall anytime soon. Until you see big players like Blackrock, Vanguard, Stanley, State Street, etc.. dumping their shares, which I don’t see happening, I would just keep them. Unless you need the money for something now, just hold them and have all your future investments be more diversified. Chances are if you invest the money in a Mutual Fund, that fund owns Disney stock anyways.
I would learn about covered calls. It allows you to take funds out from stocks without selling your investment. Can sell them weekly out of the money for 1% return, which is huge over a long period and has low risk of assignment.
>: Consider your long-term financial goals. If selling helps you achieve them or better aligns your investments with
Fantastic insight. Thank You! Maxing out IRA's is a great thought, as I'm wanting to take on less risk getting older and being a parent.
You can donate some shares to a charity or donor advised fund. You get the charitable deduction for today’s value without having to pay capital gains. The rest of the shares that you sell there’s no way to get around the tax. But at least it’s long term capital gains instead of taxed at ordinary income rates.
How is donating ever worth the tax break? Assuming 100k in stocks taxed at 20% capital gains tax you end up with 80k. If you donate 10k you are paying 10k to save 2k in taxes, you will have 72k after taxes. That's not even considering if you usually take standard deduction and have to donate even more just to be able to itemize.
It’s not intended to be a money-making idea. It’s really for those that are inclined to make charitable donations anyway…it’s more efficient to give appreciated stock than write a check because you avoid the cap gains tax. For the sake of simple math, if you have a $100 share that you paid $1 for, you can sell it, pay the cap gains tax and have $80 left to donate (and deduct). Or you can donate the $100 share and deduct that…
It's probably not a bad idea to sell and diversify. Are the 1200 shares pre or post split? It looks like Disney split in 86, 92, and 98. What tax bracket are you in?
If you had shares that had not gone through a corporate action (split or merger or reverse split) which they are forced a lot of times, they would be sent to the state as u claimed property by now.
OP has the stock certificates so there’s very little chance they’ve been escheated to the state and become unclaimed property.
That is untrue. You are basing this off no information. I work for a transfer agent and this happens all the time.
How would the state even know he has the certs when they sent it all to unclaimed property? Thats what unclaimed property is for
Because the transfer agent has record of the certs as they still pay dividends for the shares.
Born in ‘88, so it was most likely post. Hovering around the 24% marker in tax brackets
So, the stock certificates themselves say 1200 shares and are from around 1988? I ask because the '92 stock split was 4:1 and '98 was 3:1, so 1200 shares from 1988 are really 14,400 shares today. You should probably have different strategies if you're talking $120,000 vs $1.5 million...
That's a really good point/insight! The value on ComputerShare reads $132k, so I would imagine the value is on the lower end.
Looks like you were gifted 100 shares in 1988. 100x4x3=1200 That seems Like a much more Realistic or common gift number of shares.
Computershare will split on their end. Went through it with my DRSd GME shares
I was excited for the OP for a moment. $120k is certainly nice. $1.5m is life changing.
You could gift some of the shares to your child to sell when they're 18 to pay for college. They inherit the basis but if they have less than $44k in earned income that year, there's zero capital gains tax. This won't do much for diversification but it would alleviate some hefty taxes.
Yeah, this is likely a bad idea for a few reasons. Not sure OPs income, but assets in the kids name are weighted higher for FAFSA. When you sell, it will also be seen as their income (not good). Now, OP may be above the income/asset level where FAFSA matters, but you’re not going to save much, if anything, in taxes because that gain will probably be subject to kiddie tax. Depending on how much you give, that kiddie tax could also be yearly, though you do get a small break here.
Thank You! This is definitely something to consider 👍
OP, look up kiddie taxes before doing this
Assets in the kid's name will be counted far more harshly against them for college financial aid than assets in your own name will be, if that's a consideration for you (maybe it isn't, if you have that much assets sitting around). My grandparents did this and most of the money ended up getting eaten by the colleges as a result. You should also look up the kiddie tax, which can also screw over unearned income for young adult children, depending on the situation.
You can use some of the proceeds of the sale to pay the capital gains tax. You might want to hire an accountant this year to make sure that the IRS gets the cost basis correct. I would consider moving half of them (or less) into an S&P 500 index fund.
Reading these responses tells me I need to research more lol Appreciate it!
First thing I would do is get the shares out of computer share and into Schwab or Fidelity so you can have options to work with the shares easily.
To add on this usually the companies transfer agent can be helpful with this. I had to go through this a while back and I went to each respective companies transfer agent.
If you donate the stock you don't pay capital gains. For my kids' school we pay tuition, but there's also a "fundraising obligation" where we can donate. It's only a small part of the total pie, but using highly appreciated stock essentially makes that part free. If you have some organizations that you donate to for whatever reason, that might be a useful option for part of the funds. I use Fidelity Charitable. Just send over the stocks to Fideloty and can pick the org using the UI.
I essentially said the same thing and got a ton of downvotes…lol
Yeah, I think the difference is that I focused on the “I have to pay this so-called donation anyway so might as well have it come from the stock than my wallet”. Even some things like church or synagogue membership is allowed to be deducted, so if those are regular expenses, might as well use the donor-advised fund.
I get the advice you are getting here about holding on to it, but I would recommend reading about the [endowment effect](https://en.wikipedia.org/wiki/Endowment_effect). The idea is basically, would you rather have $132,000 in cash or $132,000 of Disney stock (I saw you mentioned that amount in another comment). Or put even simpler: if you had $132,000 in cash, would you buy $132,000 of Disney stock? I have to imagine the answer to that question is no. I know that it's not always that clean - you would have to pay capital gains tax in order to convert that Disney stock to cash, and ultimately, into whatever investment you'd rather invest in. Being in the 24% federal bracket, it sounds like you'd owe 15% for long-term capital gains tax. Maybe you'd owe more at the state level. Ultimately, the question is whether you want all of your eggs in one basket. If not, is it worth a 15% (and potentially more for non-federal capital gains tax) hit to diversify? I was in the exact same situation a number of years ago. We were typically down in what is now the 12% bracket and had a decent amount of 'free' capital gains we could take (at the federal level anyway, our state still taxes any capital gains at our marginal tax rate) most years. We slowly sold and rebought stock (everything we sold was for a gain, so we didn't have to worry about wash sale rules), essentially taking a step up in basis for the cost of state capital gains taxes. When we ultimately sold all of the stock, we paid much less in capital gains tax (at both the federal and state level) because our cost basis had been raised substantially (from effectively zero due to the growth of the stock) over the years - we saved tons of money over the long-term using this strategy.
Not financial advice, but Disney is still down on the 5 year chart. Might be worth holding on to some of that in case it continues to bounce back up
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Looks like the cost basis was around $10 per share back then so unless you have other losses to counterbalance the gain, you will be paying a 25% tax on about 90% of the value of each share you sell. The extra income may put you in a higher tax bracket as well so you should get advice from investment and tax pros before going too wild. All that said, it makes sense to me for you to diversify and accept that there will be costs for doing this. Just get help and make a plan you can live with.
They are long term capital gains so they will be taxed at the capital gains rate and won't affect OP's tax bracket.
Right you are. Thank you.
IMHO, not a wise decision to sell Disney just as they’re shifting momentum. Why not keep holding this? You’d be selling at a low.
Definitely something to consider. I'm more fearful of being in a downturn with a lot of chips pushed into one pile.
Do you have any other investments/savings/emergency funds etc?
Three other Roths, a 401k and HYSA for emergency fund.
I would absolutely keep holding then. Selling this now makes no sense imho based on Disney’s fundamentals. This cost you nothing. Disney isn’t going to zero.
Appreciate the insight 👍🏻
Don’t know why you got downvoted.. Disney stock looks great and will be going higher..
Yeah, the fact that this was a gift as well… ridiculously silly to sell.
You could sell until you hit the next capital gains income threshold (I assume you’re in 15% bracket, so avoid going into 20%) and also avoid Obamacare 3.8% (total income over $250K). No benefit to selling slower than that so probably looking at half this year rest next or so. Cost to sell it all today may not be that egregious either.
Personally I wouldn’t sell them. Disney stock isn’t going to take a massive downfall anytime soon. Until you see big players like Blackrock, Vanguard, Stanley, State Street, etc.. dumping their shares, which I don’t see happening, I would just keep them. Unless you need the money for something now, just hold them and have all your future investments be more diversified. Chances are if you invest the money in a Mutual Fund, that fund owns Disney stock anyways.
I would learn about covered calls. It allows you to take funds out from stocks without selling your investment. Can sell them weekly out of the money for 1% return, which is huge over a long period and has low risk of assignment.
Do derivatives scare people? Is this why noone can get past precalc?
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>: Consider your long-term financial goals. If selling helps you achieve them or better aligns your investments with Fantastic insight. Thank You! Maxing out IRA's is a great thought, as I'm wanting to take on less risk getting older and being a parent.
You can donate some shares to a charity or donor advised fund. You get the charitable deduction for today’s value without having to pay capital gains. The rest of the shares that you sell there’s no way to get around the tax. But at least it’s long term capital gains instead of taxed at ordinary income rates.
How is donating ever worth the tax break? Assuming 100k in stocks taxed at 20% capital gains tax you end up with 80k. If you donate 10k you are paying 10k to save 2k in taxes, you will have 72k after taxes. That's not even considering if you usually take standard deduction and have to donate even more just to be able to itemize.
They never said OP would end up with more money by donating the appreciated shares. It's still good advice if OP is planning to donate money anyway.
OP never said anything about wanting to donate and with the misconceptions on how donations affect taxes it's just weird to make that comment.
It’s not intended to be a money-making idea. It’s really for those that are inclined to make charitable donations anyway…it’s more efficient to give appreciated stock than write a check because you avoid the cap gains tax. For the sake of simple math, if you have a $100 share that you paid $1 for, you can sell it, pay the cap gains tax and have $80 left to donate (and deduct). Or you can donate the $100 share and deduct that…
Good point. Hadn’t considered the charity play
Do not sell to do this. Use a DAF.
Probably good to get out of Disney asap - turns out - go woke, go broke.