Michael O. AdairManaging Director, Senior Investment Consultant | 2018

Step 1: Planning and Tax Budget

One key element of the IPS is the tax budget, which defines the annual budget for ordinary income, short-term gains, and long-term capital gains.

Our portfolio managers work closely with clients to develop an Investment Policy Statement (IPS), which provides the client’s general investment goals and objectives, as well as the strategies the manager should deploy to achieve these goals. One key element of the IPS is the tax budget, which defines the annual budget for ordinary income, short-term gains (which are typically treated similarly to ordinary income), and long-term capital gains.

This tax budget is developed with the help of the client’s tax professional (CPA). In addition to being part of the portfolio’s active management, this is accounted for when transitioning assets to City National Rochdale.

EXAMPLE
A prospective client is working with XYZ firm and decides to move his portfolio to City National Rochdale. This portfolio is the beneficiary of a nine-year bull market and has large unrealized capital gains in several positions.

As a result, we at City National Rochdale move these positions over to our firm “in kind” and ask the client for an annual capital gains budget and, if needed, several tax years to implement our strategy effectively. That means we hold many of the client’s positions and work around those. If we are comfortable with the positions, we let them take the place of the positions we would have used had the client funded the portfolio with cash.


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One key element of the IPS is the tax budget, which defines the annual budget for ordinary income, short-term gains, and long-term capital gains.

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Important Disclosures

Investment management services provided by City National Bank through its wholly owned subsidiary City National Rochdale, LLC, a registered invest¬ment advisor.

City National Rochdale, as a matter of policy, does not give tax or legal advice. Before implementation, you should consult with your other advisors on the tax, accounting, and legal implications of the proposed strategies based on your particular circumstances.

The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice.

As with any investment strategy, there is no guarantee that investment objectives will be met, and investors may lose money.

City National Bank provides investment management services in conjunction with City National Rochdale, its wholly owned subsidiary. Attached herein are communications prepared by City National Rochdale that reflect City National Bank’s investment products and services.

All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that invest¬ment objectives will be met, and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.

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