Did Mrs. Wyden just make a tax boo-boo?


Nancy Bass Wyden, lifelong resident of New York and wife of U.S. Senator Ron Wyden ("D"-"Oregon"), made a big move out of the stock market on April 6, according to financial disclosure documents recently filed. She sold off somewhere between $400,000 and $1 million worth of stock on that day. And in doing so, she may have triggered a bigger tax bill than was necessary.

Before getting into the details of this news, a little background may be in order. I've been following Ms. Wyden's stock portfolio since the start of the year. When the pandemic hit a little over a year ago, she started playing the market, a fact that raises all sorts of issues. For one thing, the employees at her family business, the famed Strand Bookstore in Manhattan, are more than a little upset that she's now hedging her bets by buying stock of Amazon. But more important than that, as the spouse of a U.S. senator, she shouldn't be playing the market in individual stocks at all. It looks bad, and it may even be bad. For example, Senator Elizabeth Warren would outlaw the practice.

I got pretty deeply into NBW's stock market plays in this post in January, but now there's cause for an update. According to documents on file here, she sold between $100,000 and $250,000 worth of stocks of each of four companies on April 6. Two sales are listed as "full," which I take to mean she sold her entire holdings in each corporation's stock: Constellation Brands and Broadcom. Two other sales, of Applied Materials and KLA Corporation, are shown as "partial."

She made a killing on all four. I mean serious.

On the date she sold, Constellation Brands closed at $236.30. On the two dates she had bought, Constellation Brands closed at roughly $165 and $176.

On the date she sold, Broadcom closed at $483.87. On the various dates she had bought, Broadcom closed at between $252 and $444.

On the date she sold, KLA closed at $346.60. On the various dates she had bought, KLA closed at between $148 and $205.

On the date she sold, Applied Materials closed at $139.54. On the various dates she had bought, Applied Materials closed at between $46 and $61.

Remember, she didn't start playing this game until a year ago. Those are some tasty returns on investment.

But here's where the tax goof appears. The sales on April 6, 2021 were exactly one year later than her reported purchase of some of her stocks of three of the companies: Applied Materials, KLA, and Broadcom. According to the Senate records, she bought between $15,000 and $50,000 worth of the stock of each of those companies on April 6, 2020.

If the dates shown in the Senate financial disclosure system are correct, the gains on those stocks are all short-term capital gains for federal income tax purposes. Whereas, if she had waited just one more day before selling the blocks she bought on April 6, 2020, the gains would have been long-term capital gains, subject to much more favorable tax rates. For example, where the top tax rate on short-term capital gains in the stock market may be as high as 37 percent, the top tax rate on long-term capital gains in that market is 20 percent.

To get the good rate, you must hold the stock for more than one year, and the IRS interprets this as meaning that your "holding period" starts the day after you purchase.

Not following that rule can be expensive. For example, just for fun, assume that she bought $30,000 of the stock of each company (Applied Materials, KLA, and Broadcom) at the closing price on April 6, 2020, and that she sold those stocks at the April 6, 2021 closing price. By my amateur calculations, she would have a total gain on those blocks of stock of (gulp) $218,232. (I told you, she made a killing.) A 17 percent difference in tax rate would amount to an extra tax of $37,099.

Did NBW know this? Is there something about her tax situation, which the Senate finance discclosure documents don't reveal, that makes her timing anything other than a blunder? Was she making a patriotic gesture by incurring nearly twice as much tax liability as she needed to? For most other Americans, it would be none of our business, but when your husband is the chair of the Senate Finance Committee, these questions deserve public answers.

Don't hold your breath waiting. The Wydens' tax returns are more secret than even the Trumps'.

And anyway, $37,099 probably isn't much to the likes of the Wydens. Maybe a couple of days in the Hamptons.

The tax question aside, if you're interested in what stocks NBW is holding onto, it's all there on the Congressional website for your perusal. She's into a lot of tech, with substantial holdings in Apple, Amazon, Facebook, Google, Microsoft, PayPal, and Seagate Technologies. She's still got some Applied Materials and KLA, despite her husband taking some heat for those holdings. And she's got quite a bit of their kids' money (ages 8, 13, and 13) in Disney. She's also big on a couple of outfits called Nvidia and Vulcan Materials.

Another interesting question is what the need was for the six figures in cash. We'll probably never know that, either. But what a difference a day would have made.

Comments

  1. You actually manage to make tax law interesting, even though I still don't understand half of it.

    ReplyDelete

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