Capital Gain Harvesting in 2012Is It For Everyone?

Why consider Capital Gain Harvesting?

• Stock prices are at multi-year highs allowing for substantial gains to be locked in at lower rates. • Possible capital gain tax rates may go higher in years beyond 2013.

• The involved “Opportunity Cost” (the cost of money) is very low today. • The position sold can be re-established immediately.

• Short to intermediate cash needs

• Low or below market expectations on their investments* • Short investment time horizon* • A belief diversification outweighs possible higher taxes • A belief their personal capital gains tax rate may go higher in years beyond 2013

Capital Gain Harvesting MAY BEsuitable for investors with:

Capital Gain Harvesting MAY NOT be suitable for investors with:

A Wealth of Intelligence

The presented material is for educational purposes only. Due to various factors, including changing market conditions and/or applicable laws, the content presented may no longer be reflective of current opinions or positions. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended and/or undertaken by PWM Advisory Group, LLC [“PWM”]), or any investment-related consulting services, will be profitable, equal any corresponding indicated historical performance level(s), or prove successful. It remains your responsibility to advise PWM , in writing, if there are any changes in the your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising PWM's previous recommendations and/or services, or you would like to impose, add, or to modify any reasonable restrictions to PWM's services. A copy of PWM's current written disclosure statement discussing its advisory services and fees is available upon request. Please Note: PWM is not an accounting firm, and no portion of its services should be construed as accounting advice. WithumSmith+Brown, PC ("WS+B") is a co-founder and strategic partner for PWM. In the event that a client desires financial planning and/or accounting-related/tax preparation services, the client can engage WS+B to provide such services per the terms and conditions of a separate engagement agreement.

• Large tax loss carry forwards • High or above market return expectations on their investments*

• Who are elderly or have a short life expectancy* • Who are comfortable holding a concentrated investment over a long time period*

• A belief their personal capital gains tax rate may go lower in future years

*See reverse side for Capital Gain Harvesting analysis.

Scheduled Changes to Capital Gain Tax Rates

15% 23.8%(20+3.8) 59%

15% 20% 33%

0% 10% --

2012 2013 % Change

-NJ.com

Copyright © PWM Advisory Group, LLC.

PWM Advisory Group, LLC.

Capital Gain Harvesting in 2012Is It For Everyone?

Capital Gain Harvesting: Realizing capital gains in a given year that might otherwise have been deferred into later years.

Should High Net Worth Individuals Realize Capital Gains in 2012?

Break Even PointThe break even analysis for capital gain harvesting, based on

anticipated 2013 tax rates, is predominately a function of time

horizon and return expectations:

Time Horizon = Benefit

Return Expectations = Benefit

When analyzing the benefits of capital gain harvesting in 2012 you should consider, among other factors, your anticipated holding period and potential investment return.

Illustration*: Assume your capital gain tax rate increases from 15% in 2012 to 23.8% in 2013, and you have an investment currently valued at $110,000 that was

originally purchased for $10,000. If your investment grows 10% per year capital gain harvesting would cease being beneficial in approximately 7 years.

A Wealth of IntelligenceSee disclosure on reverse side.

No Gain Harvesting

Year-end $110,000 $121,000

Less Basis -- $10,000

Gain -- $111,000

Tax -- $26,418

Year-end Less Tax $110,000 $94,582

2012 2013

Gain Harvesting

Year-end $110,000 $104,500

Less Basis $10,000 $95,000

Gain $100,000 $9,500

Tax $15,000 $2,261

Year-end Less Tax $95,000 $102,239

2012 2013

No Gain Harvesting

Year-end $110,000 $214,359

Less Basis -- $10,000

Gain -- $204,359

Tax -- $48,637

Year-end Less Tax $110,000 $165,722

2012 2019

Gain Harvesting

Year-end $110,000 $185,128

Less Basis $10,000 $95,000

Gain $100,000 $90,128

Tax $15,000 $21,450

Year-end Less Tax $95,000 $163,678

2012 2019

No Gain Harvesting

Year-end $110,000 $459,497

Less Basis -- $10,000

Gain -- $449,447

Tax -- $106,980

Year-end Less Tax $110,000 $352,517

2012 2027

Gain Harvesting

Year-end $110,000 $396,839

Less Basis $10,000 $95,000

Gain $100,000 $301,839

Tax $15,000 $71,838

Year-end Less Tax $95,000 $325,001

2012 2027

1 Year Holding PeriodCapital Gain Harvestingis $7,657 more profitable

7 Year Holding PeriodPassing the Break Even PointNot harvesting the capital gain becomes more profitable

15 Year Holding PeriodNOT Harvesting the Capital Gainis $27,516 more profitable

* Calculations are for educational purposes only and may not be predictive of future results.

-NJ.com

Copyright © PWM Advisory Group, LLC.

PWM Advisory Group, LLC.