Uncertainty, higher taxes looming force businesses to sell out
No one seems to know what’s going to happen when the clock strikes 12 midnight on Jan. 1, 2013. Usually the ball drop at Times Square is a time for celebration. Perhaps this year it will be a bit of a let down.
With fears that we are heading for a fiscal cliff — that’s when sequestration is set to take place in the event the president and Congress fail to act — many business owners are selling out before the maximum investment tax moves from its present rate of 15 percent to at least 23.8 percent. It bears repeating — if the president is re-elected or loses to Mitt Romney, he and the Congress will have to deal with sequestration or mandatory cuts to all government spending.
“It just made more sense for me to take my chips off the table and go do something else,” said Bert Wolf, 60 years old, who has an agreement to sell his compressed-gas business, Acetylene Oxygen Co. of Harlingen, Tex., before year-end. He made his comments to The Wall Street Journal.
Wolf is not alone. In a blockbuster deal announced last week, George Lucas of Star Wars fame sold LucasFilm to Disney for a whopping $4.05 billion in cash and stock. Why? “That Lucas struck a deal in 2012 may be no accident either,” advisers say. Long-term capital gains tax from the sale of assets held more than one year are taxed at a rate of 15 percent for investors in the 25 percent income tax bracket or above (Lucas’s level), and zero for investors in the 10 percent or 15 percent bracket. Those rates are set to jump to 20 percent and 10 percent, respectively in January. “‘He probably wanted to take advantage of the lower rate on long-term capital gain while it’s certain,’” said Bill Smith, managing director at CBIZ MHM, a national accounting and professional services provider in an interview with The Wall Street Journal’s Market Watch.
While we are just days from determining who will lead these United States of America for the next four years, the winner is going to need the “Force to be with them” to get a handle on America’s financial woes.