I've been considering parking an IRA in BRK a or b shares. Does anyone use it like that? I have enough trouble keeping up with stocks for my brokerage account and figure that BRK can probably do at least as well or better than I can over the long haul.
The IRA - greatest vehicle in the world to turn nontaxable (excluded 50% prior to 1986) long-term capital gains into ordinary income taxed at ordinary rates.
The maximum tax rate on long term capital gains is 20% unless it changes this year. ALL capital gains in IRAs will be taxed at your ordinary income rate when you start to withdraw. What will that rate be?? Not even the Shadow knows.
So all of my A shares are in my IRA (done when capital gains were taxed at the same rate as ordinary income). I am seriously considering converting this IRA to a Roth IRA. When I bought my B shares, I put them in a taxable account.
I would put fixed income or high dividend paying stocks in an IRA. Put the low, or no, dividend stocks in a 401(k), or equivalent, where you might have an opportunity to avoid paying taxes at ordinary rates on the capital gains. Consult your tax advisor.
If your BRK's are in your IRA you will pay full tax when you withdraw them; but if your are lucky enough to qualify, you can roll them over into a Roth IRA while the price is low. You can then spread the taxes owed out over four years, and from now on they will appreciate tax free -- not only for you but also for your heirs. I'm personally doing for my children and grand- children.
I posted a similar message a while back and didn't receive much in the way of comments. Maybe most of you smart investors already know this, but there could be some who read this board who haven't thought about this idea.
What's nice about BRK is that you can put all your non-IRA money into BRK and enjoy most of the benefits of an IRA--tax deferral, without all the hassles and restrictions. Since BRK does not pay dividends, no tax is due until you withdraw money, just like a regular IRA.
And the only limit on your "contributions" is the limit of your available assets.