Post #11227 by Baltassar on the Berkshire Hathaway board

Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤

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The loss from paying tax on a realized gain (like a hundred billion worth of Apple stock?) is not the amount of the tax which so many people focus on, it's only some time value of that tax amount, which is generally a much smaller number.

Indeed true. I have made some simple calculations of this, and it appears that, given my own tax situation, a portfolio that pays taxes on capital gains every year at the long-term rate needs to outperform a portfolio taxed only once (at the end) by about 2% annually, assuming plausible rates of return. As the CAGR of an LTBH port increases, the improvement required to beat it also goes up (slightly). But the longer the comparison is extended, the better the chances of the tax-paying portfolio.

Baltassar

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