For investors who want to cash out of this bull market now but delay the capital gains tax, there are ways to freeze today's profit but not realize it until 1997.
The main technique is called "selling short against the box," which has now survived efforts by the Treasury to disallow it.
The investment firm of A.G. Edwards & Sons provides this example of how it works: You own 100 shares of a stock bought five years ago for $20 a share and that now trades at $50.
The $5,000 you would realize from selling it is enough to meet the personal need for which you invested the money in the first place, or you are simply convinced the stock can't go much higher. But you'd rather have the $3,000 taxable profit for 1997.
So you borrow 100 more shares from your broker and sell them employing the maneuver known as short-selling. After the short sale, your net exposure in the stock is zero--100 shares long, 100 shares short.
Come January, you can instruct your broker to use the 100 shares you own to "cover" (that is, close out) your short position.
There are other techniques as well, one using a "put" option contract, that you might consider with your broker or accountant.
Remember that if you do this, you won't benefit from a further rise in your stock's price, and you need to consider the transaction cost. The technique is probably not worth it on smaller holdings.