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Financial Planning > Tax Planning

Investors Don't Get Tax Law, Eaton Vance Says

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NU Online News Service, April 7, 2004, 1 p.m. EST – Few investors are taking advantage of a year-old tax law that provides generous breaks for investments, according to a new study by investment manager Eaton Vance Corp.[@@]

Few American investors are familiar with the Jobs & Growth Tax Relief Reconciliation Act of 2003 and even fewer have adjusted their investment programs to take advantage of its provisions, reports the fifth annual investor survey of Eaton Vance, in Boston.

The nationwide survey, conducted by Penn, Schoen & Berland Associates Inc., revealed that only 21% of investors are familiar with the 2003 Tax Act, and only 9% have made investment changes as a result of the act. Just 15% have discussed the implications of the act with their financial advisors.

Signed into law on May 28, 2003, the 2003 Tax Act reduced federal tax rates for individual taxpayers to a maximum of 35% (from 38.6%) for ordinary income and 15% (from 20%) for long-term capital gains.

Most significantly, the 2003 Tax Act reduced federal individual tax rates on qualified dividend income to a maximum of 15% from the previous high of 38.6%.

Only 20% of those surveyed could cite correctly the current maximum federal tax rate for ordinary income, and fewer than 40% could cite the maximum federal tax rate for long-term capital gains and qualified dividends.

Advisors can help clients greatly by talking to them about what the 2003 Tax Act means to them, suggests Eaton Vance.

Other findings of the survey:

? 88% believe that it is too risky to have a large percentage of their personal assets invested in a single stock.

? 52% say that apparently increased risks of investing in the stock market make them more likely than before to turn to a financial professional to manage their portfolios.

? Only 42% have reallocated any of their investments in the past year due to changed perceptions of risk, etc.

? Among investors who did reallocate their portfolios, 40% increased their exposure to stocks and 32% cut back on stocks, while 25% increased their exposure to bonds and other fixed-income investments and 22% cut their fixed-income exposure.

? 57% say they are better off today than in 2000, and 30% say they are worse off.


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