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Subject: persfin-digest V4 #1
Date: Sat, 1 Mar 1997 14:38:48 -0500 (EST)
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persfin-digest Saturday, March 1 1997 Volume 04 : Number 001
IN THIS ISSUE:
ADVERTISEMENT: MCI CONNECT FOR CC:MAIL
Buy vs. Rent?
Reporting State Tax Refund on Federal Tax Returns
RE: Using the "Buddy System" To Buy A Share For A DRIP
Ira Doesn't Eat Humble Pie
Home PC?
re: What "Something" Should My Daughter Invest In?
Re: Are Canadian taxes Really That High?
How Is Sale of Vacation Home Treated?
Re: Are Canadian taxes really that high?
Anybody use a financial aid counselor?
Simple Clarification on House Sale's Loss
Barr Rosenberg U.S. Small Capitalization
Should I pay-off my mortgage early With $100K Cash?
Canadian Taxes - Not Perfect, But Livable
Applicable Federal Rates?
Re: GEICO
Envelope Stuffing Solicitations?
Re: Rules on the Gift Tax?
Re: Real Estate & Finance Questions
Experience with Gazarelli newsletter
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Date: Sat, 1 Mar 1997 13:57:33 -0500 (EST)
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------------------------------
Date: Sat, 1 Mar 1997 14:12:15 -0500 (EST)
From: "Robert Loeser" <Robert_Loeser@Medec.com>
Subject: Buy vs. Rent?
I'm getting married in seven months. We've started to look at rental
houses and apartments and have started to realize that the rental
rates in our area are basically as high as mortgage payments. A
friend told me that I should consider buying a house while I'm still
single. He claimed that I would qualify for more first time home
buyer programs because my income is not as high as it will be after
I'm married. Does anyone know anything about this? Are the benefits
great enough that I should rush into this vs. waiting until after I'm
married and taking my time?
------------------------------
Date: Sat, 1 Mar 1997 14:13:14 -0500 (EST)
From: "Harbinder S Virdee" <hvirdee@ford.com>
Subject: Reporting State Tax Refund on Federal Tax Returns
Last year I received a $300 refund on my state (Michigan) taxes
for 1995. Earlier this year I got a form 1099G, saying that I have to
report this amount as income on my 1996 Federal Tax Returns.
Now, I am not a tax pro, but it seems to me that I am being taxed
twice on this $300. Why do I have to report the refund from state on my
federal returns? Did I not already pay federal taxes on this amount when I
filed my tax returns in 1996? What am I missing here? Is it the same in
other states too?
Any help in clearing this confusion will be highly appreciated.
TIA,
Harbinder S. Virdee
Product Design Engineer
Email:hvirdee@ford.com
------------------------------
Date: Sat, 1 Mar 1997 14:13:54 -0500 (EST)
From: "Jackson, Anthony D." <JacksAD1@central.ssd.jhuapl.edu>
Subject: RE: Using the "Buddy System" To Buy A Share For A DRIP
Lloyd wrote:
On page 10 of "Buying Stocks without a Broker", Author Charles
Carlson writes of a way, using what he calls the Buddy System, where
small investors can buy DRIP stocks without a broker.
My problem with buying stocks is the commissions that occur on
both sides of the transaction. ............etc, etc.
- ------------------------------
Lloyd check out the site below which has info on buying from companies
directly.
http://www.netstockdirect.com/
"TJ"
jacksad1@jhuapl.edu
------------------------------
Date: Sat, 1 Mar 1997 14:15:41 -0500 (EST)
From: "Robert Bly" <robly@fdic.gov>
Subject: Ira Doesn't Eat Humble Pie
Congratulations to Ira for posting (unedited) all of the correcting posts to
the "loss on sale of personal residence" issue. We now know that "humble pie"
is not on the restricted foods list of his new diet. :-) Keep up the great
work, Ira.
Bob Bly - "Money While You Sleep"
(Editor's Comment - Actually, I edited the Subject: line. The posters
were actually kinder to me than I deserved. I definitely shot from the
hip. Anyway, I hope all of you now know that you can't deduct the loss
from the sale of a personal residence - I certainly learned that! -IK)
------------------------------
Date: Sat, 1 Mar 1997 14:17:32 -0500 (EST)
From: "David F. Cameron" <dcameron@harper.cc.il.us>
Subject: Home PC?
We had a thread on buying a home PC once upon a time,
and I'd like to reopen it. I will be getting a tax
refund of over $2000 this year (not poor planning -
new house, new child, cap gains loss). I'm planning
on buying a new PC. My inclination is to go mail-order
via Micron or Dell. I'm pretty computer literate, and
do heavy duty number crunching and web access - but
haven't used PCs much (MACs, and UNIX-boxes). Anyway,
I'd be interested in hearing the following (please
respond privately - this could waste a lot of bandwidth):
1. Have any of you had real positive or negative
experiences by going mail-order. What are some
potential pitfalls?
2. Our computer manager recommends buying a COMPAQ
Presario for $999. He says you know it'll be
obsolete in 3 yrs, but if you buy a 200MhZ/32MB
memory machine it'll be obsolete in 5 or 6. This'll
be twice the time - but you'll pay 3x the price.
Any opinions on this.
3. If I do go mail order, I'd want to know about memory
upgradability. What questions would you ask? e.g.
Number of slots?
TIA - I'm sure I'll get lots of responses. In addition,
feel free to try and dissuade me. I have owned a Mac.
I think they're great - but so many web sites these days
are not Java - but assume you have Win3.x or Win95 :-(
Later,
Dave Cameron
dcameron@harper.cc.il.us
(Editor's Comment - Every computer will be obsolete in 3 years. That's
the year 2000 anyway. -IK)
------------------------------
Date: Sat, 1 Mar 1997 14:18:47 -0500 (EST)
From: bwr@courier.cb.lucent.com
Subject: re: What "Something" Should My Daughter Invest In?
Ginny --
you wrote:
||My daughter is in her first year of college and has a very limited
||income, but she has decided she wants to invest in "something"; she
||does not want to suddenly "be 30 and have nothing for all these years!"
Some mutual fund companies that allow one to start without any capital,
provided one sets up automated monthly investments, include:
Invesco Funds (1-800-525-8085; I especially like their "strategic
portfolios": Financial, Technology, Health Sciences),
Janus Funds (1-800-525-3713; I especially like their Overseas
and Worldwide funds),
American Century (1-800-345-2021; formerly Benham & 20th Century).
All of the above will permit her to start with $50 per month. One caveat,
it will be difficult to diversify with such a small amount, so she should
be prepared for a "bumpy ride".
In any case, it's great that she's already thinking ahead, as I'm sure
you'll "hear" repeatedly from the persfin list members.
- -- Bruce Reisman (bwr@lucent.com)
[my only qualifications are the management of my children's portfolios
to better than market performance every year, so far :-)]
------------------------------
Date: Sat, 1 Mar 1997 14:19:49 -0500 (EST)
From: David Meyers <dmeyers@panix.com>
Subject: Re: Are Canadian taxes Really That High?
>From: johnel@ix.netcom.com
[from previous quote:]
>care, such a Canada. Taxes that are unbelievable. Top marginal income tax
>rate of 54% that kicks in at about 70K$, most everyone else is in a 40%+
>tax bracket. Plus 7% federal and 7% provincial sales tax (=14%). Canada
>pension tax soon to b 9% employee and 9% employer (=18%) unemployment
>insurance tax of about 3% employee and 3% employer (=6%)
> If I understand this correctly, anyone making over $70k/yr (that is
>Canadian $, right?) pays (or soon will pay) 80% taxes??? (54+7+7+9+3) On
I don't know their rates However, if the rates are as listed, you
have to remember that they do not simply add up linearly as
you did in your calculation. For example, the sales taxes
are only assessed on the portion of your income that you use
to make purchases - ie. if you make $100k, and your take-home
is, say, $50k, and you spend, say, $25k on taxable goods
(ie. unlikely that you spend _all_ of it on taxable goods,
and I assume primary residence/mortgage are not taxed at
the sales tax rate!), then you pay that 14% sales tax on
only $25k of your income -- adding only a 14/4= 3.5% to your
_total_ tax burden.
Not that I'm defending these outrageous levels of taxation,
of course.
>top of that, employers are paying an additional 12% tax per employee,
>which adds up to a total of 92% tax on payroll for anyone making $70k+,
>and a total tax of 78% for "most everybody else".
Does their payroll tax have caps, as does our SocialSec ripoff?
OASDI taxes are only assessed on the first 60+k of income,
and those below that level, after throwing in various deductions
and such, pay much lower overall tax rate than the top marginal
rate you are talking about. For those making much above the 60k,
their marginal income tax rate goes up. Point being that, at
lease in the US, since there is a cap on OASDI tax, for any dollar
for which your tax rate is in the highest bracket (39.6%), you
are not paying oasdi on that same dollar.
- --D
------------------------------
Date: Sat, 1 Mar 1997 14:21:34 -0500 (EST)
From: Stanley Wu <swu@VNET.IBM.COM>
Subject: How Is Sale of Vacation Home Treated?
The sale of personal residence is pretty much black and white in Pub 17.
Anyone knows how gain and loss treated on sale of second home or vacation
home is treated?
regards,
Stanley
------------------------------
Date: Sat, 1 Mar 1997 14:22:28 -0500 (EST)
From: Bill Demuth <DEMUTH@cariboo.bc.ca>
Subject: Re: Are Canadian taxes really that high?
John wrote
> If I understand this correctly, anyone making over $70k/yr (that is
>Canadian $, right?) pays (or soon will pay) 80% taxes??? (54+7+7+9+3)
The pension and unemployment taxes are only on the first 35K$. However, you
are still correct.....every dollar above 70K$ is taxed at 54+7+7 = 68%.
Every dollar between 29K$ and 70k$ is taxed at 40+7+7 + some
Unemployement and some pension = over 54%.
In times of deficit financing it was easy to have lower taxes and still
fund our free health care, low tuitions, and generous welfare. Since the
war on the deficit has started taxes have been creeping up. We are soon
approaching the point where we will have to admit that services have to be
reduced.
Bill
------------------------------
Date: Sat, 1 Mar 1997 14:22:55 -0500 (EST)
From: MoneySecre@aol.com
Subject: Anybody use a financial aid counselor?
I'm a reporter doing a story for a national magazine on private financial aid
counselors. These are people you hire to help you through the financial aid
process when applying to college. Has anybody on this list used one or
thought about using one but decided against it? I'd like to get some
personal anecdotes to add to the story.
If you're interested in being interviewed, please e-mail me DIRECTLY at
MoneySecre@aol.com. My deadline is next week.
Thanks in advance,
Stephanie Gallagher
author, Money Secrets the Pros Don't Want You to Know
------------------------------
Date: Sat, 1 Mar 1997 14:28:27 -0500 (EST)
From: "Louis J. Schwarz, CFP, RFC" <sfc@clark.net>
Subject: Simple Clarification on House Sale's Loss
First of all, income tax is based on what constitutes the taxability of
cashflow's inflow minus some certain allowable deductions and
income-producing expenses. If you spend money to make more money,
expenses are deductible as well as gains are taxable.
Suppose if you bought a car for $20,000 and then sold it for $30,000,
then $10,000 will be taxable. But if sold for $10,000, then this
personal loss of $10,000 is not deductible. But if the car is used in
income-producing opportunity, there are depreciation deductions and if
there is still a loss when sold, then the loss may be deductible.
So if the sale of "personal" house produces the loss, it cannot be
deducted because it is not an income-producing product. Ironically, if
it makes a gain, it is an income-producing gain.
I look forward to the Congress's action to allow the personal loss be
carried to future year when it can be deducted from the future (new)
home sale's gain.
- --
Louis J. Schwarz, CFP, RFC TTY 301-587-5996
Schwarz Financial Concepts FAX 301-587-5997
814 Thayer Avenue, Suite 301 Voice Relay 800-735-2258
Silver Spring, Maryland 20910-4500 Mailto:sfc@deafcfp.com
------------------------------
Date: Sat, 1 Mar 1997 14:29:09 -0500 (EST)
From: Rodger Frego <rfrego@blitz.net>
Subject: Barr Rosenberg U.S. Small Capitalization
Does anyone have any additional information about the Barr Rosenberg U.S.
Small Capitalization fund? Is this a no load fund? I couldn't find any data
in the Quicken Mutual Fund Finder. I read about this fund for the first
time at the Kiplinger Finance web page ( see below):
Regards!
Sarge
"In contrast to the racy Berger and PBHG funds is Barr Rosenberg U.S. Small
Capitalization, which invests in tiny, undervalued stocks. Until recently,
it required a $1-million minimum investment. At Kiplinger's request, the
sponsor slashed that to $2,500. Former professor Barr Rosenberg, founder of
BARRA Inc., a well-regarded investment-consulting firm, devised complex
computer programs to select the stocks for U.S. Small Cap. The fund seeks
to outperform the small-company Russell 2000 index and is always fully
invested in stocks. Rosenberg, 54, is no tire kicker who visits companies
his fund invests in. "The decisions are made by the computer programs," he
says, "so it's my job to improve and preserve and protect the programs from
changes in the economy or the data bases."
http://www.blitz.de/~rfrego
------------------------------
Date: Sat, 1 Mar 1997 14:30:32 -0500 (EST)
From: nram@ix.gen.com
Subject: Should I pay-off my mortgage early With $100K Cash?
Howdy Y'all, (That's Texican)
Please be patient with me. I just joined the list-serv & this is my
first post. Any suggestions will be appreciated.
My question concerns whether or not I should pay-off my mortgage.
I'll use round figures as an example.
Balance due = $100,000.00 at 7%
Monthly payment (Minus taxes & insurance) = $1,000.00
Annual total payment = $12,000.00
Annual total interest = $11,400.00
IRS Tax Bracket = 28%
I can afford to pay-off the mortgage.
Would I be better-off using the $100,000.00 to pay-off the mortgage
or investing it & continuing with the normal mortgage payments?
Wally
NRAM@ix.gen.com
------------------------------
Date: Sat, 1 Mar 1997 14:31:30 -0500 (EST)
From: jpoulter@islandnet.com (Jack Poulter)
Subject: Canadian Taxes - Not Perfect, But Livable
O> If I understand this correctly, anyone making over $70k/yr (that is
O>Canadian $, right?) pays (or soon will pay) 80% taxes??? (54+7+7+9+3) On
O>top of that, employers are paying an additional 12% tax per employee,
O>which adds up to a total of 92% tax on payroll for anyone making $70k+,
O>and a total tax of 78% for "most everybody else".
Well, it's not quite as bad as that, but like people everywhere
Canadians think they pay too much in the way of taxes.
The sliding tax scale hits the big earner, but there are also a
lot of tax shelters (e.g. pension plans, etc.) and the
percentages quoted are applied to "taxable income" not total
income. Last year my total federal and provincial income taxes
worked out to about 25% of my total income, which was _not_ in
the $70K+ category.
In addition there are limits on the unemployment insurance
premiums that are levied. It has a ceiling of about $35K on
which premiums are paid. The Goods & Services tax and Provincial
Sales tax are applied to retail sales and do not, in general,
apply to foodstuffs.
The reason for the high levels of taxation are to pay for the
health care services and education. The one great feature of the
Canadian health care system is that your coverage cannot be
cancelled because you have suddenly been diagnosed with a
catastrophic disease, and long term care is available to those
who need it without having to liquidate the family assets.
It ain't perfect, but it ain't all bad, as some politicians and
health insurance executives would have you believe.
------------------------------
Date: Sat, 1 Mar 1997 14:32:27 -0500 (EST)
From: drew blaha <blaha@spyder.net>
Subject: Applicable Federal Rates?
> > Hi tax and loan experts.
> >
> > I have a loan with a family member, and for the IRS to consider it
> > legal, we are required to use the Applicable Federal Rate as the minimum
> > interest rate to avoid gift tax from setting in. This also allows me to
> > deduct the interest as mortgage interest since there is a lein on my
> > house. I hope to refinance in the next few months and would like to be
> > able to get the AFR easily so I can figure when to refinance. Getting
> > the AFR form the IRS 1-800 number is usually a 30 minute affair of being
> > put on hold and transfered until someone knows what I'm talking about.
> > Does anyone here know of a convient way to get the Applicable Federal
> > Rate?
> >
> > Thanks
> >
> > Drew Blaha
------------------------------
Date: Sat, 1 Mar 1997 14:33:04 -0500 (EST)
From: afn01634@afn.org (George Kolb)
Subject: Re: GEICO
I was with GEICO for a couple of years and had one relatively minor
comprehensive claim during that time. They settled the claim quickly for a
fair price, and they had a local representative to do it. I found their
customer service to be good, their rates to be competitive, and their
billing statements to be more detailed than some other companies that I've
dealt with. I hate any company that sends vague bills without giving a
breakdown of what the charge detail looks like. This is especially
irritating with changing something (especially with insurance) mid-term.
They usually just send you something saying you owe or are due $xx with no
explanation of how they arrived at the figure.
I've since switched to State Farm, but not for anything that GEICO did
wrong. I do have one qualm though: I don't agree with GEICO's policy of not
insuring people who have radar detectors.
George Kolb
Gainesville, FL
------------------------------
Date: Sat, 1 Mar 1997 14:33:38 -0500 (EST)
From: afn01634@afn.org (George Kolb)
Subject: Envelope Stuffing Solicitations?
I've seen all sorts of ads for "make $$ stuffing envelopes from your home"
over the years in newspapers and magazines. Last week I got a solicitation
via email for the same type of thing. Has anyone ever followed through with
one of these offers? They always want money up front for registration or
whatever term they use...does anyone know what's up with these? Has anyone
ever made any money from them or are they simply, as I suspect, some kind of
list they send you with companies who *may* want you to help them mail
things out for a fraction of what the ads lead you to believe?
George Kolb
Gainesville, FL
------------------------------
Date: Sat, 1 Mar 1997 14:34:05 -0500 (EST)
From: "L. Chen" <am302@FreeNet.Buffalo.EDU>
Subject: Re: Rules on the Gift Tax?
> Maybe someone on this can clarify the gift tax for me. If someone was
> going to give a family money to buy a vehicle, would the person be able to
> give $10,000 per person in the family (kids included) tax-free or just
> $10,000/per parent?
>
> Thank you.
>
> Laura Tarver Angle
If you are thinking of putting your kids' share of gift toward the car,
that may not be proper use of their money. You should check it out.
If the donor has a spouse, the donor and his/her spouse can each give you
and your spouse $10K -- for a total of $40K.
If $40K is insufficient and you are not in a hurry to buy that car, you can
wait till Jan 98 -- the donor and his/her can each give you and your spouse
$10K each in Dec 97; and again in Jan 98 -- for a total of $80K.
Lily Chen
am302@freenet.buffalo.edu
------------------------------
Date: Sat, 1 Mar 1997 14:36:08 -0500 (EST)
From: "L. Chen" <am302@FreeNet.Buffalo.EDU>
Subject: Re: Real Estate & Finance Questions
> 1) Is there a benefit from transferring the title of property from
> grandmother to grandchild for the purpose of selling the property and
> immediately rolling the money over into another home of equal or greater
> value??? What are the tax implications? Some background, the grandchild
> is single, in a high tax bracket, and wants to buy a home in the near
> future. The grandmother no longer lives in the home, the property has been
> kept up but the grandchild does not desire to live there.
If the grandmother is not using the home, how about the grandmother
selling that home and buy the home that the grandchild wants? If that
home is not the grandmother's primary residence, it still may be possible
to do it in a like-kind exchange. There may be gift tax involved.
Or if this is the grandmother's primary residence in the recent past, she
may be able to exempt the first $150K(?) of the capital gains from income
tax.
The ideal alternative is to keep it in the grandmother's name to get a
step-up basis.
> 2) What are the benefits of getting a co-op vs. buying a condo outright?
A condo is like a house, in a legal sense. You own the condo (real
estate). In a co-op, the co-op corporation owns the building. You own
SHARES in the corporation that entitles you to a lease to a specific unit
in the building. In a condo, you can get a mortgage, just like a house.
In a co-op, you get a loan, secured by the shares you own. The interest
rate on the co-op loan is generally higher than a mortgage.
In a co-op, the co-op corporation generally has a mortgage on the
building. Therefore, the purchase price of the co-op is not your true cost
(which includes a pro-rata share of the corporation's mortgage).
Your share of "maintenance" charge (based on the number of shares
allocated to your unit) includes your pro-rata share of corporation's
mortgage payment, if any; and the real estate taxes on the building (since
the coproration owns the building). Depending on your proprietary lease,
the building may be responsible for everything inside the walls --
including the pipes inside your unit. And if there is central heating,
that is also building's responsibility. Accordingly, the "maintenance"
charge for your unit is not comparable to simply the sum of "common"
charge + real estate taxes on a condo.
In a condo, you have to pay a "common" charge and real estate taxes on
your unit (and of course your mortgage). And you are responsible for
everything in your unit, structural or not, unless it is a building-wide
problem.
In terms of tax deduction, there is no disadvantage in owning a co-op vs
a condo.
In non-financial terms, a sale of a co-op needs co-op Board's approval
which, theoretically, can be rejected for no reason (as long as it does
not violate any laws re discrimination). That can be a advantage or
disadvantage, depending on your circumstance/view. You should also look
at the financial statements of the corporation. Also review the
proprietary lease.
Depending on the building, there may also be a limit on the size of your
co-op loan.
> 3) How do you declare an investment in a now bankrupt company where you lost
> money?
Don't know
> Thanks,
> C. Azu
Lily Chen
am302@freenet.buffalo.edu
------------------------------
Date: Sat, 1 Mar 1997 14:37:05 -0500 (EST)
From: Stephen Brodeur <sbrodeur@draper.com>
Subject: Experience with Gazarelli newsletter
Hi-
** WARNING** Somewhat long and boring ***WARNING **
Last December I decided to 'bite' when the latest propaganda arrived from
Elaine Gazarelli- I signed up for the _Gazarelli Outlook_ Inner Circle
Club. I reviewed the material and the service, but I did not alter my
investments (whew!). I have completed my test drive and discontinued the
service and requested a refund. This is a [longish] review of my experience.
Elaine Gazarelli had been the most talked-about market timer, up until last
May or so, anyway. She has a model that had quantitatively [crossing a
threshold value calculated from her model] predicted the last several major
market corrections. The most recent prediction, which began last May at the
*bottom* of the market dip and ended in January, was a false alarm. Elaine
recommended getting *out* of equities at that time, and staying out until
January. Any followers who took her advice lost out on the significant
market growth of the last 6 months or so.
The first information package gave a little more information about the
areas used as the basis of the prediction model and their relative weights.
This was not sufficiently detailed so that you could just code it up to run
on your own, but it did give some inkling as to what things were considered
important. It also described Elaine's recent history and the evolution of
the model.
In addition to the very sweeping recommendation of 'sell all equities' or
'buy back now', the newsletter did offer some tempered versions of the
advice. For example, there were some categories or sectors that were ok to
hold, if you must hold on to something (but for heaven's sake, don't buy
more!). If a subscriber kept at least some of their holdings, they wouldn't
have missed the boat completely. Also, the subsequent 'buy' signal came
with some suggested sectors and specific stock picks to snap up right away,
said to be 'poised for particularly good growth, as they have already been
beaten down' (my paraphrasing). So there's some generic
stock-picking-newsletter stuff mixed in with the market timing advice.
The newsletter also came with a special service that called me with a
recording whenever a special alert was issued. This is to allow the
subscriber to take immediate action, before word leaked out to the
non-subscribers. I must admit, this service worked as advertised. I
received a recorded voice message at each of two designated phone numbers
when the buy signal was issued. This was followed by a special edition of
the news flash 2-3 days later via USPS, with specific buy recommendations
[and an offer to extend my subscription for an additional year at a reduced
price....;) ]
In addition, there is a special hotline for subscribers to call if they get
antsy and want more details in between monthly newsletters and special
alerts. The call-in line is a regular toll call [not 800, but not 900
either] and is updated approx. weekly. I found this to be a lame 3-5 minute
summary of the the financial news items of the week (cpi release, new
housing starts, meetings of the Fed...), followed by the latest
Gazarelli-model value and a reminder of whether we should all be in the
market or out of the market. The news I heard on the radio while commuting
during the week was more informative.
Overall, the service provided everything they said they would, except the
performance of the recommendations was HORRIBLE!
** Chalk up another win for the market (vs. the market timers)!! **
I didn't even learn anything as a result of reading through the material. I
*WOULD NOT* recommend that anyone subscribe. Instead, spend your money
*and time* on becoming educated about how to choose your investments, and
then make informed decisions for yourself.
Enough. Sorry to be so long.
- -Steve Brodeur (x2496)
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End of persfin-digest V4 #1
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