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Tis the Seasons!
Curt's Quick Comment
Understanding Market Cap
From the Financial Presses
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I used to work at NORAD and I always thought the Santa Tracker was pretty cool...and it has gotten cooler.  For those of you with young children or nieces/nephews or are young at heart yourself here is a link to the site.
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Financial Strategies
Planning Techniques, Procedures and Guidance for Military Professionals

Merry Christmas! I hope you all had a wonderful Thanksgiving.  Ours didn't go exactly as planned, but family was together and that is all that really matters.
This issue of Financial Strategies starts out with some thoughts on Charitable Giving and your Taxes.  I think a lot of us could improve our tax picture and make our gifts more effective with a little planning.  And it is the season of gifts (and taxes), no?
My Quick Comment is a reminder that your ability to deduct medical expenses is limited by ObamaCare.
Have your ever wondered what Small Cap, Mid Cap and Large Cap stocks really are?  The second major article addresses that question.
Finally, I found a couple articles that I found interesting.  The first article addresses (again) the fact that stock prognosticators are rarely correct.  The last article covers a planning technique that can be used for blended families.
I hope you have a wonderful holiday season and that you can spend it with family and friends.  And don't forget to take a moment tomorrow and remember Pearl Harbor.

Happy Holidays!
Curtis L. Sheldon, EA, AIF®
C.L. Sheldon & Company, LLC
(703)542-400 or (800) 928-1820
Tis the Season!  Control Taxes and Help Charities with Planned Giving Strategies


All thoughts turn to gifts as the Thanksgiving Turkey wears off.  But when it comes to charitable giving, I would guess most of us don't put a whole lot of thought into the process.  We send a check and go about our business.  But, you can favorably affect your tax bill and quite likely increase the good you do for your favorite charity depending on how you give.  Let's take a look at some.

  • Give Cash | DeductThis is the type of giving most of us do.  We send a check to a charity and take an itemized deduction.  We, in essence, spend a dollar and save a quarter on our taxes (depending on you marginal tax bracket).
  • Give Securities | Avoid Income | Deduct. You have the option to give securities (stocks, bonds, etc.) to charities and the charities are very happy to accept them.  If you gift a security that you have held for more than 1 year you get to deduct the Fair Market Value (FMV) of the security on the date of the gift.  And here is the key, since you don't sell the security you never recognize income from the capital gains included in the FMV.  This reduces your overall income by more than the amount you actually give (you get to deduct the amount you give and never declare the amount of capital gain as income) and also helps lower your Adjusted Gross Income (AGI) which controls/limits a lot of deductions and credits. get more than a quarter in reduced taxes for each dollar given.  The charity may also be able to hold the security and harvest capital gains from it as well.  By the way, you can repurchase the security (not from the charity) "immediately" and reset the basis.  This means that when you sell the stock you won't pay taxes on the capital gain you transferred to the charity...ever.
  • Give | Get Some Back | Deduct | Control Estate Taxes.  Through the use of trusts and annuitization you can kind of have your cake and eat it too.  The tools to accomplish this have rather odd names such as CRATS, CRUTS, CLATS and CLUTS.  In essence you give money to a charity and one of two things happen.  Either the charity pays you a monthly annuity and keeps what is left over when you pass away or the charity takes a monthly annuity and your estate gets the remainder upon your passing.  Depending on the exact type of arrangement you deduct either the present value of the annuity payments or the left-overs on your current year income tax return.  From an estate tax (and probate) standpoint any amount that goes the charity is removed from your estate.  This technique helps the charity a lot as the charity has either a predictable stream of income or a lump sum that can be used now and the annuity payments made in later years.
  • Give | Become a Hero | Get the Money Back.  This one is my favorite.  But, let me start by saying this is one where you will absolutely need assistance from an estate planning attorney.  Here is how it works.
    • You make a large gift to a charity (and become a hero)
    • Your large gift comes with a large income tax deduction and resulting refund (there are annual limits, but unused losses can be carried forward)
    • You use the tax refund to fund a whole life, life insurance policy with a face value the same as what you gave to the charity
    • The insurance policy is placed in an Irrevocable Life Insurance Trust (ILIT) with your children (or whoever you would like) as the beneficiaries
    • Upon your passing the life insurance pays the insurance to your children without any estate or income tax owed
    • Remember, this is a top-level view.  There are lots of details that have to be executed correctly

These 4 techniques are ones you should consider before breaking out the checkbook.  I think most of us give to charities because we want to help, but if your Rich Uncle (Sam) wants to pay for part of your donation, why not let him help out?

Curt's Quick Comment
Do you deduct Medical Expenses?  Thanks to ObamaCare your deduction may go down.  This year (2013) you can only deduct medical expenses that exceed 10% of your Adjusted Gross Income (AGI).  Prior to this year, you could deduct medical expenses in excess of 7.5% of AGI.  So,take a look at where you stand.  You may want to pull medical expenses from January into December or push December medical expenses into next year.
Market Capitalization: A Tool for Understanding a Stock's Risk


Market cap -- or market capitalization -- allows investors to understand the relative size of one company versus another. Market cap measures what a company is worth on the open market as well as the market's perception of its future prospects, because it reflects what investors are willing to pay for its stock. It is calculated by multiplying the price of a stock by its total number of outstanding shares. For example, a company with 50 million shares selling at $30 a share would have a market cap of $1.5 billion.


Large-cap companies are typically firms with a market value of $10 billion or more. They often have a reputation for producing quality goods and services, a history of consistent dividend payments, and steady growth. As a result, investments in large-cap stocks may be considered more conservative than investments in small-cap or midcap stocks, potentially posing less risk in exchange for less aggressive growth potential.


Midcap companies are typically businesses with a market value between $2 billion and $10 billion. These are typically established companies in industries experiencing or expected to experience rapid growth. These medium-sized companies may be in the process of increasing market share and improving overall competitiveness. Midcaps may offer more growth potential than large caps, and possibly less risk than small caps.


Small-cap companies are typically those with a market value of $300 million to $2 billion. These are generally young companies that serve niche markets or emerging industries. Small caps are considered more aggressive and risky. The relatively limited resources of small companies can potentially make them more susceptible to a business or economic downturn. They may also be vulnerable to the intense competition and uncertainties characteristic of untried, burgeoning markets.


Micro-cap companies have a market capitalization of between $50 million to $300 million. The upward potential of these companies is similar to the downside potential, so they do not offer the safest investment, and a great deal of research should be done before entering into such a position.


What Impacts a Company's Market Cap?


There are several factors that could impact a company's market cap. Significant changes in the value of the shares -- either up or down -- could impact it, as could changes in the number of shares issued. Any exercise of warrants on a company's stock will increase the number of outstanding shares, thereby diluting its existing value. As the exercise of the warrants is typically done below the market price of the shares, it could potentially impact its market cap.


But market cap typically is not altered as the result of a stock split or a dividend. After a split, the stock price will be reduced since the number of shares outstanding has increased. For example, in a 2-for-1 split, the share price will be halved. Although the number of outstanding shares and the stock price change, a company's market cap remains constant. The same applies for a dividend. If a company issues a dividend, its price usually drops as the number of shares increases.


To build a portfolio with a proper mix of stocks, you'll need to evaluate your financial goals, risk tolerance, and time horizon. A diversified portfolio that contains a variety of market caps may help reduce investment risk in any one area and support the pursuit of your long-term financial goals. (1)




(1)Diversification does not assure a profit or protect against a loss.

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Because of the possibility of human or mechanical error by S&P Capital IQ Financial Communications or its sources, neither S&P Capital IQ Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall S&P Capital IQ Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2013 S&P Capital IQ Financial Communications. All rights reserved.

From the Financial Presses


Wall Street's Top Prophets Are Bad For Your Profits


Wall Street largest firms every December make predictions about which industries will be the best for investors in the year ahead. The financial media eat it up. Don't get sucked into it. Wall Street's prophets are not very good for investor profits....(Read More Here)


7 Tax Moves Plans to Make Before 2013 Ends


Year-end tax planning could be especially difficult in 2013. Although a number of federal tax breaks became effective in 2013, several tax hikes kicked in on high-income individuals:...(Read More Here)
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC 's current written disclosure statement discussing our advisory services and fees is available for review upon request.
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