Irvin, This is my strategy if Dinar is taxed as capital gains and Dong is taxed as ordinary income.
I just don't think we should exchange Dong in the same year as exchanging Dinar which will raise
ordinary income and cause us to pay the highest tax rate on the exchange of the Dinar.
I would rather give the Dong to others and pay zero for capital gains on the Dinar.
I think people will, in general, exchange first and then consult a financial planner and at that point, it will be too late.
I'm going to exchange Dinar myself and give Dong as a gift to others who don't have Dinar.
After the RV: if you have both Dinar and Dong, you will want to talk to a financial planner before you exchange the Dong. We are hearing that the Dinar will be taxed as Capital Gains (either long term or short term so have your purchase receipts ready when you have your taxes done). On the other hand, we are hearing that the Dong will be taxed as “ordinary income”. The following strategy is for that situation.
If exchanging the Dong will increase your “ordinary income”, then you will be boosted up into the highest tax bracket (whether Long Term or Short Term) on the exchange of the Dinar. That means you could pay 39.6% federal plus 3.8% Obamacare tax in addition to your state income tax. So I suggest you exchange Dinar for yourself the first tax year and either give Dong as a gift to others or wait to exchange Dong the following tax year.
If you have Dinar and it is taxed as Capital Gains, it will be taxed according to your tax bracket and whether LT or ST. First, you will want to hold Dinar so it is Long Term (366 days after purchase) and keep your purchase receipts for tax filing. You will be required to file estimated quarterly tax payments for the current tax year after the exchange. The key will be to reduce current year “ordinary income” and maximize your deductions during the year that you exchange Dinar so that your tax bracket is 0% or 15% and the following year you will get back most, if not all, of the estimated taxes paid.
You could reduce income by:
Quitting your job or business
Taking an unpaid leave of absence until year end
Postponing any bonuses until the following year
Keeping money in non-interest bearing accounts
Holding any capital gains (winners) until the following year.
Postponing retirement income
Postponing social security income
You could maximize your expenses by doing the following for you, your spouse, and your dependents in the same year as the exchange;
Tithe to your church and give to charity (up to 100% of income below $250,000)
Contribute full amount to a traditional deductible (not Roth) IRA, if working
Contribute maximum amount (16%) to 401K plan, if working
Take out a home equity loan to remodel your home (for deductible interest)
Wait until Dec 20th to payoff your home to maximize interest deduction
Buy and finance a second home for deductible interest (2 homes are deductible)
I install a solar energy system or wind turbine on your personal real estate and claim a tax credit of up to 30% of the installation cost
Buy rental property and start fixing it up but don’t rent it out until Jan 1st
Claim deduction for “points” and prepaid interest on all new home purchases
Pay state tax for current year by Dec 20th even though not due until next April
Pay all real estate tax by Dec 20th even though not due until next April
Pay tuition by Dec 20th for the whole year (if it’s a deductible expense)
Pay medical premiums by Dec 20th even though not due until the following year
Pay all medical out of pocket expenses by Dec 20th
Claim as many dependents as you legally can (other relatives you support)
Have all dental work done for whole family and pay this year (deduction)
Have a thorough vision checkup for whole family and pay this year (deduction)
Order a year’s worth of contact lenses and pay this year
Order two or more pair of glasses and pay this year
Have elective surgery done and pay this year
Buy new cars, a boat, an RV, etc and deduct state sales tax paid
Do not trade in your old cars, donate them to charity for a write-off
Arrange your business to “lose money” or break even so it’s a write-off
If you move for work, save receipts and claim moving expense deduction
Sell all stocks that have a capital loss by Dec 20th but hold winners until next year
Expect to be audited! Keep ALL cancelled checks and receipts for every single deduction and contribution.
Work with your CPA or financial planner throughout the year to fine tune your deductions to reduce your marginal tax rate to 15%.
Note: If you live in a state with state income tax (such as Calif) and the revaluation happens beforeMay 15th, consider buying a new home in a state that does not have state income tax (such as Washington, Nevada, Texas, Florida). Check the residency requirement for each state. Close escrow and move there before June 30th. Set up full time residency there (register to vote, change registration on all cars, work there, live there, send kids to school there) and plan to stay there for two full years. Then when you exchange the Dong in the year following the exchange of the Dinar, you may be able to save the amount of state tax that you would have been taxed.
For example: If you have 5 million Dong and it revalues at $1, you would have $5,000,000 after the exchange. If you live in Calif, you would pay about 10.3% state income tax or about $515,000. If it revalues at $3, you would pay $1,545,000 in state income tax. If you moved to a “no income tax” state and set up residency prior to the exchange, you might be able to pay zero state tax and save enough to cover the cost of a beautiful new home. Just plan to stay two years to file income taxes twice in case your former state challenges the move.