Capital gains tax could rise

The election is over, and new taxes may be on the horizon. Veterinarians with stock to sell or who want to sell their practices should be concerned about what could happen to the long-term capital gains tax rate. For those in the 5?percent and 10 percent income tax brackets, the capital gains rate in 2008 is zero, but that may increase next year under President Obama. It's time to review your assets to determine if you'll be reporting long-term capital gains and when.

If you're selling a practice ...

The question of whether you sell the practice this year or the next could be a big one if tax rates change in 2009. And don't be fooled by installment sale rules. If you close the transaction this year but put off payments under a multi-year installment plan, you'll pay capital gains tax at the prevailing rate in the year you collect the payments. Entering into an installment sale doesn't necessarily save you money on taxes. All it does is spread the cost of taxes over the period of time you collect the payments. As always, it's crucial to talk to your tax advisor.

If you've sold a practice ...

If you've entered into or will enter into an installment sale this year and you believe higher taxes are on the horizon, there is hope. You may elect out of the installment sale rules and pay all of the tax on your transaction in 2008 while the lower rate prevails. You have until the filing due date of the return to decide what to do. Consider this option with caution, however. Once you've elected to pay the taxes at once, you can't change your mind without the IRS's permission.

If you've got capital losses ...

Remember that long-term capital losses can offset capital gains. If you have a large long-term gain in 2008, you may want to consider creating long-term losses to offset the gain. Creating long-term losses in a tax year with no offsetting gains can limit your ability to take that loss. The deductible amount per year is $3,000.