Rethinking Tax RiskRethinking Tax Risk

Donald D. Kozusko, partner, Kozusko Lahey Harris LLP, Washington, DC

Federal taxes on income, gifts and estates reduce the fruits of investment success, but otherwise seem unrelated to investment decision-making. Our tax law and culture do not permit U.S. taxpayers to treat their tax returns as an opening bid. In theory, every tax question is expected to have a right answer, however obscure that answer may be. Contrast this mindset with the marketplace of investing, where differences of opinion are more plentiful than opportunities, and investors constantly strive to gain the upper hand by applying better analytical tools.

Thus, tax risk analysis usually bears little resemblance to investment risk analysis. Many wealthy taxpayers measure t...