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Preparing your portfolio


This is part 2 of Jeff Francis’ column offering advice on how to trim your taxes before year’s end.

It’s important to look at your investments when planning your year-end tax strategy. Here are four important steps:



REVIEW YOUR PORTFOLIO

If you realized any capital gains during the year, check your portfolio to see if you can sell some “losing” investments and trim your taxable gain.

Consider selling enough losers to shelter your gains for the year, and selling off additional property to realize losses up to $3,000 – the maximum deductible capital loss. Additional losses may be claimed on future tax returns.



INVEST CAREFULLY

If you’re considering an investment in a taxable mutual fund, check the fund’s distribution dates. If you buy near the end of the year, you could receive a taxable distribution fairly quickly. If the fund’s first distribution is before year-end, decide whether you want to wait to invest until after that first distribution.



DONATE APPRECIATED

PROPERTY

It’s the season of giving, and that includes your favorite charities. Beyond the usual deduction for charitable giving, donating property that has grown in value can benefit your tax situation (by reducing your capital gains) as well as the charity of your choice.



TAKE ADVANTAGE OF TAX-DEFERRED INVESTING

If you participate in a 401(k) plan, you are entitled to contribute a maximum of $13,000 for this year. ($16,000 if you are at least age 50).

If you haven’t “maxed out” your donation, consider making additional pre-tax contributions before year’s end.

If you’re self-employed, you may be able to set up a Keogh plan any time up until Dec. 31 and defer some of your 2004 earnings. You have until April 15, 2005, to actually make the contribution and deduct it on your 2004 taxes. The deadline for contributions to tax-deductible IRAs also is April 15.

These tax tips can help you trim your income taxes and make the most of what you make. But, as always, the best tax advice is to talk to a professional.

He or she knows the intricacies of current tax laws and can help you craft the strategy that works best for you.



Jeff Francis is senior vice president and senior investment officer for First Tennessee Brokerage. For more information about this or other personal finance issues, please call 865-971-2321 or visit your local First Tennessee financial center.









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