Another Tax Saving Vehicle

BY GARY M. SULLIVAN

I appreciated the article highlighting the tax impact of investment returns (“A Taxing Problem,” JofA, May00, page 51).

My clients have also benefited from the tax efficiency of unit investment trusts (UITs). Typically targeted toward specific themes, such as worldwide wireless or Glass-Steagall companies, they have a buy-and-hold strategy to maximize tax efficiency. At the end of the holding period investors can roll their shares or take in-kind exchanges allowing them to further defer their taxable gain.

  • UITs have other benefits as well:
  • Known portfolio.
  • Diversification. Portfolios can be diversified across many securities, offering one for almost every asset allocation need.
  • Low expenses.
  • Daily liquidity. Units may be redeemed on any business day at the redemption price.
  • Professional portfolio selection and supervision.
  • Full investment in the market. UITs have limited cash positions.
  • Ease of ownership. With one low minimum purchase investors can own a diversified portfolio of securities without making a substantial commitment of time or capital.

To summarize, UITs are a tax-saving vehicle for investing in a particular segment of the market without having to commit too much capital.

Gary M. Sullivan, CPA/PFS, CFP
Burlington, Massachusetts

SPONSORED REPORT

Get your clients ready for tax season

Upon its enactment in March, the American Rescue Plan Act (ARPA) introduced many new tax changes, some of which retroactively affected 2020 returns. Making the right moves now can help you mitigate any surprises heading into 2022.

100th ANNIVERSARY

Black CPA Centennial, 1921–2021

With 2021 marking the 100th anniversary of the first Black licensed CPA in the United States, a yearlong campaign kicked off to recognize the nation’s Black CPAs and encourage greater progress in diversity, inclusion, and equity in the CPA profession.