The Daily Dow
Monday, July 28, 1997
by Robert Sheard

HILTON HEAD, SC. (July 28, 1997) -- Congress and the President have finally come to an agreement on the capital gains tax rate. As expected, the agreement calls for capital gains to be taxed at a maximum rate of 20% rather than 28%. (Capital gains are gains from stocks or other capital investments, such as a home, held at least one year. Gains on stocks held a shorter time are taxed at your ordinary income tax rate. The new tax code will not change that rate.) For those stocks one holds for more than five years, the rate is shaved an extra two points to 18%. Not much of an advantage there, frankly.

TMF Bogey did some quick calculations for us regarding the new rate. Assume an initial Dow portfolio of $5,000 and an annual gain of 22% before taxes (just under the prior long-term rate for the Foolish Four). If the portfolio turns over 100% every year and you had to pay the full 28% old rate each year, after 30 years the portfolio would grow to $477,073.20.

The new rate of 20%, however, lets an identically managed portfolio grow to $761,372.10 after 30 years. In other words, with the new lower tax rate, your portfolio would be worth an additional 60% because of this tax reduction.

This is the type of tax measure that iprovides an incentive for long-term investments in American industry and will also give homeowners thousands of dollars more in savings from their investments in their homes that would otherwise have been eaten away in taxes.

(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. ________________________________


1997 Foolish Four Model
Stock  Change   Last
--------------------
T    +   5/8   36.50
GM   +1  5/8   58.50
CHV  +   1/16  78.31
MMM  +   7/8   95.50

          Day   Month    Year
        FOOL-4   +1.37%   2.12%   4.33%
        DJIA     +0.10%   5.74%  25.95%
        S&P 500  -0.25%   5.80%  26.42%
        NASDAQ   -0.39%   8.42%  21.11%

    Rec'd   #  Security     In At       Now    Change
   1/2/97  153 Chevron       65.00     78.31    20.48%
   1/2/97  120 3M            83.00     95.50    15.06%
   1/2/97  179 Gen. Motor    55.75     58.50     4.93%
   1/2/97  479 AT&T          41.75     36.50   -12.57%


    Rec'd   #  Security     In At     Value    Change
   1/2/97  153 Chevron     9945.00  11981.81  $2036.81
   1/2/97  120 3M          9960.00  11460.00  $1500.00
   1/2/97  179 Gen. Motor  9979.25  10471.50   $492.25
   1/2/97  479 AT&T       19998.25  17483.50 -$2514.75


                             CASH    $767.60
                            TOTAL  $52164.41