Re: "Hiding" capital gains

From: "L. Chen" <am302@freenet.buffalo.edu>
Subject: Re: "Hiding" capital gains
Date: Mon, 20 Dec 1999 02:35:42 -0500 (EST)

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> Date: Fri, 17 Dec 1999 11:55:53 -0800 (PST)
> From: Brian Gordon <briang@netcom.com>
> Subject: "Hiding" capital gains
> 
> I have a "happiness problem" -- humongous gains from ESO stock after IPO --
> but I can't stand the idea of giving up 40% of it to taxes.  A financial
> advisor has just suggested I bury it in Oil Exploration/Drilling, with an
> outfit that has a good track record, so that almost all of it it a tax
> deduction which is never recovered.  Too good to be true?  More complex than
> I understand? 

Do NOT make any investment JUST for tax reasons.  And don't invest in any
thing that you don't understand. 

Oil exploration/drilling (esp. exploratory drilling) are high risk
investments.  You can save 40% in capital gains taxes and lose more than 100%
of your investment -- because (if you read the prospectus/memorandum) in order
to get the size of deductions represented by the sponsor, you have to be
liable for your share of the leverage used in the project.  

So you could end up worse off than paying the 40% tax! 

Chen



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