A couple of months ago I wrote about year-end tax planning, and warned investors to watch the dates carefully on last-minute market transactions to generate a capital gain or loss for your 1982 tax return.
When I said you had until Dec. 31 to sell securities for a capital loss, it was--and still is--the correct information.
Then I said you would have to make a sale for a gain by Dec. 23 if it was to show up on your 1982 return. That's because a loss is recognized on the trade date, but a gain isn't recognized until the settlement date--five business days after the trade.
Well, that had been the rule for the past 10 years. And it was still the rule when I wrote the column, and even on Nov. 29 when it was published.
But it isn't any more. In late December, the IRS published Revenue Ruling 82-227 that blew the whole thing. This is the first opportunity I have had to let you know of the change.
The new rule is a pretty good deal for investors because it offers a choice between reporting the gain in the year of the trade or in the following year.
The change results from the 1981 modification of the rules for reporting installment sales. Under the new rules an installment sale is simply defined as a disposition of property when at least one payment is to be received after the tax year in which the sale occurs.
Because of the new definition, a market trade of a security at the end of December 1982 with payment received in early January 1983 qualifies as an installment sale.
And because it qualifies as an installment sale you can report the gain in 1983, the year you receive payment. Or you can elect not to consider the transaction an installment sale and instead include it on your 1982 return.
You need only report the sale in the normal manner on your 1982 Schedule D; this action informs the IRS of your election not to treat it as an installment sale.
Of course this new information comes to you too late to affect your year-end tax planning. But if you had transactions resulting in a gain during the last few days of 1982, you now know that you can report the gain for either 1982 or 1983.
If you have a highly developed social conscience, you may have been trying to tailor your investments in line with your ideas.
There are varying ways to merge your attitudes about society with your investment dollars. You can avoid investing in companies that trade with South Africa, for instance, in those that produce armaments or nuclear energy products or that have a record of polluting the environment.
On the other hand, an investor can intentionally buy into those companies, then raise questions at stockholder meetings--questions designed to embarrass the corporate managers and perhaps induce them to mend their ways.
Now a new opportunity has opened up for "social investors." Several mutual fund sponsors have established funds with a stated goal of investing in "socially responsible" companies.
Of course each of us has a different idea of "social responsibility." You must read the prospectus to see if the fund's concepts and yours are compatible.
A local organization that sponsors such a fund is the Calvert Group, which recently introduced the Calvert Social Investment Fund. The fund (a no-load) offers a choice of two portfolios.
The "money market portfolio" invests primarily in securities of government agencies associated with some social purpose like low-income housing or student loans.
The "managed-growth portfolio" holds mostly stocks and bonds, limited to the issues of companies that the fund managers believe are responsive to social problems like conservation of natural resources and fair employment practices.