When President-elect Barack Obama was Candidate Obama on the campaign trail, there was talk of raising the tax level on long term capital gains from the current 15% to as high as 29% but soon became 25%. It has not been that high for quite some time.

Obama was challenged by this throughout the campaign and it was one of the questions he faced in the presidential debates. He had to answer a direct question as to why he would raise this particular tax in light of evidence that the reduced rate had benefited the government coffers and investors. He replied that he was interested in balancing the budget and fairness in the system, but that he would be weighing all of the issues under discussion and he might temper his opinion.

Well, as I recall, toward the end of the campaign he tempered his opinion all the way down to 20%.

Now what brings this to mind as we close out the year is that I have been reviewing 2008 with my accountant and making projections for the purpose of last minute adjustments I might need to consider. As we were discussing capital gains for 2008 we, like many of you reading this, discovered there would not be any. The losses outweighed the gains.

Then I started thinking about Obama wanting to raise the tax and realized he could raise the tax to 100% because this year and next many people may not be paying any due to their accumulated losses. As a matter of fact, in extreme cases some folks may not be paying any capital gains even if he is in office eight years.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.

We all hate to lose money on our investments. As long as you don't have to sell stock right now you can ride out the losses with hopes of a recovery. Those of you who did need the money this year or who decided to take your lumps, can minimize those losses by writing them off when you file your 2008 tax returns.

There are actually two parts of the IRS tax code that can apply. The most obvious is the rules for writing off capital losses. Another alternative is available if you had to abandon stocks or were a victim of an investment scam. I'll take a brief look at both.

If you have an investment loss you can write off up to $3,000 (up to $1,500 if you're married filing separately), but you first must offset any capital gains with your losses. For example, suppose you sold your stocks in 2008 with a total capital gain of $500 for the year and a total capital loss of $5,000. You would write off the first $500 of the capital loss against the capital gain and have $0 capital gains this year. Then you could write off the next $3,000 against your regular income. You would then have $1,500 left over. You could then carry over that $1,500 for write offs on your 2009 taxes. For more details about how to handle your loss, read IRS Publication 550's chapter on "Sales and Trades of Investment Property."

If John McCain wants my vote he must dump Sarah Palin and fast. Judging by the latest polls showing Barack Obama moving ahead and gaining traction, I'm not the only one that feels this way. The outcome of the election is key to investors worried about a range of issues including the $700 billion federal bailout of Wall Street.

Obama may lack the experience I would hope to see in a presidential candidate but to quote a friend and fellow McCain supporter "Sarah Palin is an idiot and the only way she should be allowed in the White House is if she buys a tour ticket." This is not a unique sentiment given the Sarah Palin must go stance taken by conservative columnist Kathleen Parker of the Los Angeles Times. She says her cringe reflex is being exhausted.

I do not like Obama's proposals on capital gains taxes, a windfall oil profits tax, new government programs and several other issues, but the idea of Palin being second-in-command is a joke. And speaking of jokes, if I have misjudged, and McCain and Palin win the election, then Oprah will be surpassed as the wealthiest female in the entertainment industry. The new titan will be 30 Rock and former Saturday Night Live star Tina Fey who will be racking up fat paychecks based on the never ending material supplied by Palin.

One issue likely to influence voters' choice for U.S. president in November is the U.S. economy.

The Iraq War/War on Terror, and other issues, such as health care concerns, are likely to be factors as well, but look for concern about the economy to be paramount. Of course, political science teaches us that party identification and voters' attitude toward each candidate will also help determine the vote for president.

(In a nutshell, the political science theory that best predicts vote is PI + ATC + MSI = Vote. Or, Party Identification + Attitude Toward the Candidate + Most Salient Issues = Vote. But more on that, some other time.)

Further, regarding the U.S. economy, there's been considerable coverage regarding its health -- sometimes too much -- but not as much clarity. So, without further ado, some "givens" or clarity about the U.S. economy.

• U.S. GDP: The U.S. economy is experiencing anemic growth, but technically, it is not in a recession. Unemployment is trending up -- now at 6.1% -- put is still relatively low, compared to unemployment levels in previous economic slowdowns. [Note: The above is not to slight anyone who has lost his/her job; each job lost is a serious problem/concern for the person involved.]
• Median income: The median U.S. family income is down. In 2006 the median U.S. family income, adjusted for inflation, was $58,407, according to the most recent U.S. Census Bureau data, down from $59,398 in 2000. Since the economic slowdown started in October 2007, it's possible, but not likely, that median family income rose in 2008, but more than likely it fell. Moreover, it probably fell during that time period, for most families.

Let's say you poured your life savings into shares of Enron stock and lost $250,000. You'd like to use that for the tax loss but you run into a small problem: You can only use $3,000 of that loss per year to offset your gains. You'll need to live another 83 years to use your full tax loss!

There's a rule that should allow people to get around this: people who lose money to theft can deduct the entire value of the loss from their income, carry it back to claim refunds for two prior years, and carry it forward to offset income for the next 20 years.

But you won't be able to count that Enron loss as theft. According to Forbes, the IRS has issued a memo explaining the limitations on claiming a theft loss: you can't count a theft loss if you bought the securities on the open market. If you bought them directly from the issuer, or the broker was involved in the scheme somehow, you might have a case. For most investors, that won't help.

I'm trying to understand the rationale behind this and, I must say, I'm coming up short. There's an argument that allowing investors to take theft losses in cases of fraud would lead to people taking advantage: if a company settles charges with the SEC over options backdating, could an investor claim theft loss, even though the stock went down because of issues not related to the "fraud"?

I don't have a solution to this, but there has to be some alternative to telling victims of fraud that they'll have to hang around for another 83 years to take advantage of the tax loss.