Et Tu, Costco?

Today and tomorrow, we’ll be publishing excerpts from the latest Hewins Financial President’s letter, including a look at upcoming tax code reforms and the fiscal cliff.

Let’s be clear; we are here to help you maximize your after-tax return. It is not for us to opine on tax policy, per se, but it is our job to assist you in seeking the best deal you can get, within the law, of course.

As a guy who started shopping at The Price Club in Redwood City, CA a long time ago, and who has continued shopping at Costco (which acquired The Price Club) ever since, I guess I am not surprised that the Board recently decided to borrow $3.5 billion and issue a special dividend to the stockholders before year-end. They certainly focus on every penny, and this is not a small thing. The Wall Street Journal estimates the co-founder and former CEO, Jim Sinegal, will save $4 million in taxes, compared to what he would probably pay under the new, higher rates that he supports.

See WSJ Article: “Costco’s Dividend Tax Epiphany”.

Jim supported tax increases very publicly, but nevertheless is avoiding them personally to the extent he can. This should surprise no one, as we observe this behavior every day. Which brings us to our first and most important point:

Please make sure to speak to your CPA and your financial planner right away regarding what you might do before the end of December in response to the likely changes in the tax code.

While we do not know exactly what the new tax code will look like, we believe it is now safe to assume that taxes will be substantially higher. There are many opportunities for businesses and individuals to pay taxes at 2012 rates and save money. It is certainly worth having a conversation.

If you have questions or would like more information please call us. We are here to help.

Costco has company; lots of companies are borrowing to pay dividends to owners ahead of this big change:

See WSJ Article: Firms Flood Bond Market to Finance Payouts.

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Roger Hewins

Roger has more than 30 years of experience in investment management, helping bring the sophisticated financial advice typically reserved for large institutional clients to everyday investors, from high-net-worth individuals and families to small businesses and retirement plans.