Making it, keeping it, growing it

Naughty and nice investments: 4 strategies for the holidays

While gift giving can be one of the greatest joys of the holiday season, it can also be the cause of great stress.

To blow off a bit of steam, some may turn to their vices to make it through December and into the New Year.

Perhaps that is why “sin stocks” of tobacco, alcohol and gaming companies appeal to certain investors, while others actively seek out the opportunity to invest in socially responsible, morally rigorous investments or use the end of the year to present the nicest gift of all: investing in one’s own family or favorite charities.

As you make your list and check it twice, here are investing and gifting options for both the Naughty and Nice.

Naughty
I believe that stressed consumers help fuel the vice industries with their coping mechanisms during the holiday season.

A recent survey from Caron Treatment Centers found that 75% of adults do not drink in moderation during the holidays and “64% of Americans have called in sick or know someone who has missed a day of work due to a hangover after a holiday party”¹. These survey results suggest to me that some consumers could be fueling the vice industries if they are missing work to do more drinking — or shopping, eating or gambling — while celebrating the holiday season. If so, and assuming such behavior reflects consumer demand in vice industries, then I would suggest to Naughty investors that they watch for investment opportunities resulting from this year’s holiday revelry.

Nice
Putting vices aside, let’s focus on the nice list for this year.

Gifting comes in many shapes and sizes — some even with tax benefits for the informed giver.

2012 is indeed a year that may have many overwhelmed by a sense of uncertainty when considering tax implications. I believe the main reasons for this level of uncertainty are the exemptions on the estate tax, the lifetime gift tax and the generation-skipping tax. All are set at $5 million but headed for expiration by the end of 2012². Should these taxes go up next year, there is all the more reason to gift wisely this year.

Here are three ideas to consider

1) Direct Annual $13,000 gift tax exempt donation placed into 529 plans

For holiday giving, many clients put annual tax-free gifts of $13,000 for each child or grandchild directly into 529 accounts. These accounts allow tax-free accumulations of investments in accounts earmarked to pay for higher education expenses. Imagine the smiles that come with knowing money is being saved up!³

2) Weighing the Value of Big Gifts Now vs. Later

Above and beyond the annual exclusion gift limit of $13,000, the federal applicable exemption amount for transfers during life (gifts) and death (estates) has increased (by indexing) to $5,120,000 per person for 2012 — the highest it has been since the establishment of the estate tax.

The pressure of the $5 million estate and lifetime giving tax weigh heavily for many clients. Do you gift now or later? After all, the current status means that before they die a client can give up to $5 million to any individual —including their grandchildren — without paying taxes on the money. For couples, the limit is $10 million with a 35 percent tax on assets above that amount.

For some, taking advantage of this type of gifting works with their family dynamics to be a gift that positions the family members towards their career ambitions and goals⁴.

3) Donate highly appreciated stocks as your charitable giving

This allows a client to avoid gifting cash while keeping up with their giving and avoiding paying capital gains taxes on low-cost basis investments.

However you choose to give this season, do so wisely! As the New Year awaits, be sure to give to yourself and your family but make sure to have your estate manager and private wealth manager on hand to help make smart decisions that weigh tax implications at every twist and turn.

Happy holidays!

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David Osborne is the founder of Osborne Advisors, an independent private wealth management firm offering wealth management to high net worth individuals, families, estates and corporations since 1999.

Securities are offered through SWS Financial Services, Inc., a registered broker-dealer and registered investment adviser that does not provide tax or legal advice, located at 1201 Elm Street, Suite 3500, Dallas, TX 75270 (Member: FINRA/SIPC; 214.859.1800).

Sources:
1. “Hungover at Work During the Holiday Season?” Caron Treatment Centers.
2. Brunet, Gillian. “New Estate Tax Rule Should Expire After 2012.” Center on Budget and Policy Priorities.
3. Galteri, Pat. “Gift & Estate Tax Exemptions from Tax Relief Act of 2010 Expiring 12/31/12 – Generation Skipping Transfer Tax (GST).”
4. Erb, Kelly Phillips. “Tax Increases Looming in 2013: Who Pays, How Much and Will They Stick?” Forbes.

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Drive time

Tesla’s driverless Cybercabs are preparing to hit the roads in Dallas

X/Tesla

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Tesla’s self-driving Cybercabs, already on the roads of Austin, will be roaming the streets of Dallas in the near future.

In an October 10 post on the X social media platform, Tesla’s vice president of AI software, Ashok Elluswamy, said Cybercabs are coming “soon” to Dallas. He offered no timeline.

The futuristic Cybercab differs significantly from Tesla’s more laidback Model Y Robotaxi, which cruised into the Dallas area this spring.

Both autonomous electric vehicles are manufactured in Austin, where Tesla is based. The Robotaxi Tracker website shows 319 Cybercabs and 420 Robotaxis are registered in Texas today.

Perhaps the most striking difference between the Cybercab and Robotaxi is the absence or presence of driving controls.

The Cybercab — made especially for driverless ride-hailing trips — lacks a steering wheel, gas pedal, and brake pedal, among other typical fixtures. The vehicle uses camera vision and sensors to navigate streets, highways, parking lots, and more. The Robotaxi features a traditional steering wheel and pedals.

Another difference: The Cybercab’s bench-style seating accommodates only two passengers. Depending on the configuration, a Robotaxi can carry up to four or five passengers in the front row and rear row. Touchscreens are installed in both rows. The Cybercab comes with a single touchscreen.

A Cybercab’s exterior color stands out — either a matte or glossy golden shade — and comes with two butterfly doors. The Robotaxi has a less-flashy paint scheme and a more conventional four-door setup.

Also unlike the Robotaxi, the Cybercab isn’t equipped with side mirrors, a rearview mirror, or a back window.

Inside the Cybercab, you’ll find a large interactive touchscreen, and enough cargo room for large items like luggage, golf clubs, and scooters.

Elluswamy’s comment about Dallas came in response to an X post saying Austin had more than 300 Cybercabs. The cars, which launched in Austin last month, were spotted throughout the city during the just-concluded ACL Music Festival.

In Tesla’s July call with Wall Street analysts, Elluswamy praised the Cybercab as “a phenomenal product.”

“Anyone who rides in it instantly falls in love with the experience,” he said.

The National Highway Traffic and Safety Administration (NHTSA) may not be in love with the Cybercab, though. It has launched two investigations into them.

In September, NHTSA opened an investigation into data that Tesla supplied to obtain federal certification of the Cybercab. Investigation paperwork notes their lack of a steering wheel, gas pedal, brake pedal, and mirrors.

This month, the federal agency opened an investigation into reports that Cybercabs and Robotaxis had exceeded posted speed limits in active school zones.

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