The Insanity Of Capital Gains Tax Breaks...

[csziggy]

15. Your assumptions are not completely correct

Capital gains do not apply strictly to stocks and bonds. They can apply to other more tangible investments.

For instance, some years ago when my business was booming I checked into cutting the trees off about ten acres of my lowland. If I sold the trees, the money they brought in would have almost covered the cost of clearing, fencing and planting the land in grass to add to our pastures. There might have been enough profit to pay for the damage to the pastures the timber trucks would have to drive through to get to those back acres.

That is, it might have been enough until I factored in paying the capital gains from the growth of the trees. At that point capital gains would have taken 28% off the top and that would not have left me enough to make the land usable. Even at the rates that have been in effect more recently the marginal amount for the trees I might have gotten was not enough for the improvements I hoped to make.

As a result I did not make the improvements and our limited pasture space cost us in additional hay cost and loss of business.

It's all good, though - our farm is a unique ecosystem and the increased land left dedicated to wildlife is a benefit to future generations.