Go to Jeff Salisbury LWGate Home Page.From: persfin-digest <owner-persfin-digest@shore.net>
Subject: persfin-digest V4 #9
Date: Wed, 19 Mar 1997 17:54:31 -0500 (EST)
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persfin-digest Wednesday, March 19 1997 Volume 04 : Number 009
IN THIS ISSUE:
ADVERTISEMENT: domainTNG
How Much Should a Simple Massachusetts Divorce Cost?
Saving $$$ Buying Books Online
Re: Homeowners Insurance Dilemma - Get The Policy
Re: Room Addition/Handicapped Child
Re: Return of Capital
Re Marriage/Social Security, Medicare-cal - Marriage Penalty
Re: IRA for College Expenses?
Mortgage Interest Rates - 90% Interest?
10K Gift Rule?
Re: Liability Insurance?
Re: Zip Drive and Iomega Ditto
The new Dow - How Has It Adjusted?
Compaq is Selling Direct - Maybe Shorting CompUSA Is A Good IDea
NASDAQ divergence With S&P 500
mortage loan types: fixed vs ARM, bank vs mortgage company
Umbrella insurance Question
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Date: Wed, 19 Mar 1997 16:43:34 -0500 (EST)
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------------------------------
Date: Wed, 19 Mar 1997 16:51:03 -0500 (EST)
From: The Editor <ikrakow@shore.net>
Subject: How Much Should a Simple Massachusetts Divorce Cost?
A friend of ours (no, it's not me - I'm happily married, thank you) is
contemplating a divorce from her husband. There are minimal assets and no
child custody problems. We started looking for lawyers for her and were
amazed at the fees. One lawyer quoted $190/hour with a $3,000 retainer.
My questions are: (1) what's a reasonable fee? and (2) what questions
should either (a) we ask on behalf of our friend, and (b) she ask herself?
Interested in any personal experiences. I'll keep all responses
confidential unless you give explicit approval to publish.
Thanks.
Ira
------------------------------
Date: Wed, 19 Mar 1997 17:08:15 -0500 (EST)
From: The Editor <ikrakow@shore.net>
Subject: Saving $$$ Buying Books Online
As some of you know I run an online shopping mall at:
http://www.krakow.com
I sell books through my Web site. I represent 4 distributors:
amazon.com
books.com
altbookstore.com
econnection.com
I discovered yesterday that amazon.com is selling bestsellers of all
types (basically the books you'd see at the front of Barnes and Noble) at
40% off. You can buy these directly at:
http://www.amazon.com
(I'm telling you this even though I don't get any commission on books
bought directly from Amazon.com - simply because I don't think you can
beat this deal.)
Amazon.com is doing this, I believe, as a loss leader for their other
books. At 40% off they'll probably just about break even or perhaps lose
some money, but they'll have you in the store. Their other books
typically carry a 10% discount, sometimes less. I've even seen books
offered at *more* than retail.
If you want to buy a book other than a bestseller, I suggest the
following:
1) Check out the price at http://www.amazon.com. Also check out their
shipping policy.
2) Comparison shop by checking the price at
http://www.krakow.com
If you go to the "bookstores" section, you can use the search engines for
books.com, altbookstore.com, and econnection.com. You might get a better
deal than at amazon (the typical discount at books.com, for example, is
15%) and the shipping policies might be better.
Bottom line - you can now shop for books online, find out in minutes
whether it's in stock or not, get the best terms on price and shipping,
all from your computer. In my opinion, Barnes and Noble and Borders are
another stocks to short. There's no real need for megabookstore
buildings.
Interested in your comments, as always.
Ira
------------------------------
Date: Wed, 19 Mar 1997 17:31:56 -0500 (EST)
From: afn01636@afn.org (Stephanie M. Kolb)
Subject: Re: Homeowners Insurance Dilemma - Get The Policy
Bob,
I'd go ahead and take the policy from General Star! Like you said, you'll
get better coverage at a cheaper rate. It sounds like you've done your
homework as far as researching the insurer (A.M. Best, financial strength,
etc.) and IMO, you'd be better off getting out of the JUA anyway.
The JUA is now the second largest insurer in the state of FL (behind State
Farm). It was never meant to be that large; it was supposed to be a
temporary measure while the large companies regrouped. Your concern about
General Star being able to cover a major disaster are not without merit;
however, if the state was really hit with an unthinkable disaster like your
worst case scenario, in all likelihood, the Feds would step in like they
have with the recent flooding and other disasters. It might take longer
than settling claims with an insurance company, but you (and the
thousands/millions of other people would all be in the same boat, and would
*probably* have some sort of federal assistance coming).
By the same token, the JUA has never been tested in any significant
disaster! That's pretty scary in itself, seeing as how they *ARE* the second
largest insurer in the state now... There's a lot of argument right now
regarding its ability to cover a major disaster, but that's a whole other
conversation.
I'd take the savings and go with GS. I think you'd have better odds with
them (especially given your research so far) than you would with JUA. FYI,
I am an insurance agent, but not with GS, so there's no sales pitch here.
Stephanie Kolb
Florida
------------------------------
Date: Wed, 19 Mar 1997 17:32:37 -0500 (EST)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re: Room Addition/Handicapped Child
In general any modifications to a residence to meet the needs of a
handicapped child are deductible to the extent that the cost of the
modifications exceed the increased value of the property due to the
modifications (details in IRS publication 502)
For example, if you spent $10K (I had to have a number) on the room
addition and the property only increased $9K then you could deduct $1K but
if the IRS determined that room additions in your area only increase the
the value of the property by 90% of what the additions cost you would have
no deductions. I have seen surveys in newspapers which show that you get
x% back on a room addition, y% back on a kitchen addition etc. A good
realtor might be able to help you get the percentage.
A safer (from avoiding an audit standpoint) would be to get your contractor
to spell out the costs of the ramp, extra hand rails, special fixtures etc
in the bathroom, extra wide doors etc and limit the deductions to those
items.
There is one school of thought that says when in doubt deduct but an
unusally large deduction raises a flag, and can trigger an audit. I suspect
that a swimming pool will trigger an audit. The question in an audit is
how clean you are tax-wise. - A person on a salary is proably fairly clean,
a self employed contractor could be in a lot of pain.
Not a tax professional, this advice is worth what you paid for it.
Avrum Lapin
Upland, CA
------------------------------
Date: Wed, 19 Mar 1997 17:33:04 -0500 (EST)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re: Return of Capital
I am fairly certain that return of capital reduces your basis in the
investment. In the case of a mine, you could get all of your investment
back as return of capital. I don't know what happens if you get to a point
whre there is negative basis
Not a tax professional - this advice is worth what you paid for it
Avrum Lapin
Upland., CA
------------------------------
Date: Wed, 19 Mar 1997 17:34:11 -0500 (EST)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re Marriage/Social Security, Medicare-cal - Marriage Penalty
The average widow/widower who falls in love and remarries will suffer a
loss of family income. Once again the system encourages living in sin.
The following will try to illustrate the point
a) Everyone who works for 40 quarters (10 years) is eligible for Social
Security beginning some time after age 62. The amount you get will depend
on when you begin to draw and how much Social Security tax you paid (or
more precisely on what your Social Security wages were).
b) The spouse of a retiree gets a Social Security benefit between 37.5 and
50% of what the retiree's benefit is when they reach 62. The exact
percentage depends on whether the retiree and the spouse began drawing at
age 62 or 65
The spouse gets the larger of (a) or (b) but not the sum. If the wife was
a homemaker for most of her adult life or earned substantially less tha the
husband, (b) is usually larger than (a)
c) The widow(er) of a retiree gets about 85% of the retiree's benefit (I
am not sure of the exact number)
A widow would get the larger of (a) or (c). Again for most cases (c) is
larger than (a)
A widow who re-marries ceases to become a widow and becomes a spouse of the
new husband and reverts to (b). (b) is usually smaller than (c).
Each individual case is different. I don't know if Social Security will
give you a specific numerical answer in advance. I have found the people
at the 1-800 number to be helpful in summarizing the rules.
There should be no difference in Medicare
MediCal could be a problem if one of the parties is eligible and one is not.
It sounds crass, but if there is "money", or certain heirlooms a
pre-nuptual agreement might be a good idea.
Not a professional, This advice is worth what you paid for it.
Avrum Lapin
Upland, CA
------------------------------
Date: Wed, 19 Mar 1997 17:35:13 -0500 (EST)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: IRA for College Expenses?
[Disclaimer: this is my opinion, not advice. I am not a professional.]
>My understanding of IRAs is that I can withdraw money at any age as long as
>I use a life expectancy table and continue to withdraw for at least 5 years.
Not quite. You can withdraw money in this fashion for the LONGER of 5
years or until you hit 59.5. So if you are 40, you have to keep the
withdrawals going until you are 59.5. If you are 56, you have to keep
them going until you are 61. And if you make a mistake, the 10%
penalty is applied retroactively to *all* of the withdrawals.
>First, does that sound correct to any of you experts? Does that mean I can
>stop withdrawing after 5 years, and maybe start contributing again?
See above. As for contributions, as long as you are under 70.5 and have
earned income (or your spouse does) you can make contributions.
>Does this seem like a good way to help save for college? I would get the
>tax savings for the earnings, but wouldn't have to give up control of the
>money.
I don't think so, because you have to keep making the withdrawals for
potentially a really long time. In general, tapping retirement plans
for things other than retirement is not a good idea. However, you
really have to run the numbers. Because compounding is not a linear
process, it may well be that the extra growth you get due to the tax
deferral is enough so that even after paying the income tax and
penalty on an early withdrawal, you're ahead of where you would have
been in a taxable account. However, the more tax-efficient the
taxable account is, the less likely this will be true.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Wed, 19 Mar 1997 17:35:48 -0500 (EST)
From: nram@ix.gen.com
Subject: Mortgage Interest Rates - 90% Interest?
Re: Robert Bly's Comments:
Robert wrote:
>
>In answer to the gentleman who thinks he is paying 90% interest on his
>mortgage: Although the total interest paid on a 30 year loan is onerous, it
>is not a 90% ROI to the lender. For example, on a $100,000 loan at 8%, the
>first payment of $733.77 would include $666.67 in interest, which would be
>about 91% of *that payment*. However, of the approximate $8,805 in total
>payments the first year ($733.77 x 12), only about $8,000 of that is
>interest, which is an 8% return on the $100,000 loaned by the bank.
- --------
Thank you Robert for your comments & thoughts.
Please tell me if the following assumptions are somewhat accurate:
The amount paid over the 30 years for the $100,000 home will be about
$260,000.
A person would need to earn about $361,000 (before taxes) to pay the
$260,000 to own the $100,000 home (assuming a 28% tax bracket).
If a person invested the $733.77 per month (in your example) for the
360 months (30 years) at 8% ROI, the amount accumulated would be
over one million dollars ($1,093,581.00). Would not the bank be doing
something like this with the $733.77 received each month?
So, the bank loans $100,000 and after about 11 years has recovered
the $100,000 and continues to receive $733.77 per month for 19 more
years or about another $160,000 plus the Million Dollars from the
reinvestment.
Therefore, buying the $100,000 home with 360 easy payments of $733.77
over 30 years has cost the borrower the opportunity of over one Million
Dollars plus the $160,000 in interest to the bank
Also the borrower has been trading $1.00 of interest for 28 cent of tax
deduction. That would be trading $160,000 for $44,800 in tax deduction.
If the borrower made double payments, this 30 year mortgage would be
paid-off in about 7.5 years. This would produce a savings of $130,393
in interest & provide 22.5 years to accumulate over 1/2 Million Dollars
($551,826) by investing the $733.77 per month at 8%.
So, what is the real cost of the $100,000 at 8% house if paid with 360
payments of $733.77 over 30 years?
Wally Kenimer
NRAM@ix.gen.com
------------------------------
Date: Wed, 19 Mar 1997 17:44:12 -0500 (EST)
From: H Chang <hchang@ti.com>
Subject: 10K Gift Rule?
Could someone explain what is the tax rule regarding the 10K (yearly
maximum) gift to children? Could one's retired parents also qualify
as recipients? What are the forms and documents needed to file it in
the income tax return?
Thanks,
Helen
hchang@ti.com
(Editor's Comment (not a tax pro, as he has demonstrated numerous times) -
Any individual can give 10K to any US citizen, free of gift tax. Form 709
needs to be filed only if any gift to any US citizen exceeds $10K, or is a
gift of "future interest" (someone help me out here). There's also some
exemption related to tuition payments and medical payments. I'm
summarizing from JK Lasser's Your Income tax. Good basis (no pun
intended) to start. -IK)
------------------------------
Date: Wed, 19 Mar 1997 17:45:49 -0500 (EST)
From: Keith Mealy <kmealy@cincom.com>
Subject: Re: Liability Insurance?
L. Chen asks:
> I am interesting in a discussing topic about liability and liability
>insurance.
> Here are some questions I would like to hear from some experts:
>
> 1. What is the diffrence between corporated and incorporated regarding the
>liability when you formed a company?
>
> 2. What is the maximum liability you or your company may be faced if you
>encountered lawsuit or bankruptcy? Is it only based on the total common stock
>values your company issued, or the current asset value?
>
> 3. What are the type of liability insurance which are common used to
prevent
>the nightmares regarding your personal, home owner, business and auto, etc.? I
>heard about umbrella insurance is the type of liability policy, I guess you
>should have to purchase it separately for each kind protection, right?
>
> 4. Is there any single umbrella policy we could have to cover the basic
>protection including your personal, home, auto and small business?
>
My opinions and understandings are:
2. It depends on the structure of your company. Sole proprietors or partners
have unlimited liability. Incorporated shareholders have liability limited to
the value of their stock (i.e., it can become worthless). However, I believe
that large liability claims, or bankruptcy can cause liquidation of
corporate assets.
One strategy is to have two companies, one to hold the assets (e.g.,
vehicles, office equipment, buildings), and lease them to the operating
company. Then if the operating company gets sued, it is "asset-less".
I'm sure there are other reasons why to do or not to do this. Consult a
lawyer or CPA.
3 & 4. An umbrella policy will sit on top of both your homeowners and auto
policies and be an additional amount of liability for both. Whether or
not it covers your business, or if you need additional business liability
may depend on your policy.
Since I'm not in business, my umbrella only covers home (including
"personal"), and auto. I have, from time to time, had an "incidental
business" rider on my HO, that covered liability for people on my property
for business purposes (clients coming to my house for meetings).
An umbrella policy will require you to carry certain minimum liability
coverages on your base policies (auto and HO), for example mine requires
$300K. It can be considered a liability policy with a $300K deductible.
Just think about this: if you get sued and your insurance company is
defending you, which lawyers do you think they will send if you have
$100,000 of insurance vs. $4,000,000 (the amount they would have to pay
if you lose)?
Keith Mealy kmealy@cincom.com
Cincinnati, OH http://www.cincom.com
------------------------------
Date: Wed, 19 Mar 1997 17:46:59 -0500 (EST)
From: theraven@juno.com (John l Barreras)
Subject: Re: Zip Drive and Iomega Ditto
>From: "Smiley, Charlie/ATL" <csmiley@CH2M.com>
>Subject: Zip Drives vs. LapLink
>
>I believe the Zip Drives are more practical than a package like
>Laplink.
> They come in 100MB(Zip) and 1GB(Jaz) sizes. That is plenty to copy
>files from one machine, Swap the drive to the other machine and then
>copy onto the other machine. In addition, they are small and
>portable.
>
I have been following this discussion, but I haven't seen anyone
mention the iomega ditto. I have one and we use them for certain things
@ work. The ones we/I use hook up to the parallel port and are external.
They hold 400 megs uncompressed, 800 compressed (yeah right). I highly
recommend these units.
John
------------------------------
Date: Wed, 19 Mar 1997 17:47:31 -0500 (EST)
From: Jim DeArmon <jdearmon@mitre.org>
Subject: The new Dow - How Has It Adjusted?
Question: How was the new DJIA computed/adjusted in light of the recent
substitution of 4 companies? We have the same sense of the numeric level
of the Dow as we did last week. Seems like some kind of calibration was
necessary for this to be so. (I can recall some other economic indicators
"jumping" up or down when their calculation was revised.) Thanks, Jim
DeArmon
------------------------------
Date: Wed, 19 Mar 1997 17:48:35 -0500 (EST)
From: "Barry H. Rodin" <brodin@pica.army.mil>
Subject: Compaq is Selling Direct - Maybe Shorting CompUSA Is A Good IDea
From: "Louis J. Schwarz, CFP, RFC" <sfc@clark.net>
Yes, go and short Egghead, but don't short CompUSA!
You cannot download a new hardware, IRA!!! You still need CompUSA in one
way or other!
Louis J. Schwarz, CFP, RFC TTY 301-587-5996
Compaq computer has just gone into the direct mail-order business
to sell their computers, so maybe you should short both Egghead and
CompUSA !
(But use your own judgement!)
Barry
------------------------------
Date: Wed, 19 Mar 1997 17:50:20 -0500 (EST)
From: Nick Lebredo <NLebredo@exchange.ureg.ohio-state.edu>
Subject: NASDAQ divergence With S&P 500
From: "David F. Cameron" writes...
Does it concern anyone else that the S&P and the NASDAQ are
traveling such divergent paths? ...snip
Although the NASDAQ is an index with over 5,000 stocks it is a market
value weighted index. This means that those companies with the highest
market capitalizations affect it the most. When it comes to high
market value companies, the NASDAQ lacks the diversity among
industries found in the S&P 500 index. Consequently, the technology
sector tends to affect the NASDAQ much more than the S&P 500. Many of
the high market-cap companies in the NASDAQ are technology companies
such as Microsoft, Intel, Cisco, Oracle, Dell, 3Com, and Ascend. These
and many other hi-tech, high market-value companies have had quite a
run-up the past couple of years. I think we can safely assume that
there is some cautiousness on Wall Street as to whether many of these
companies can continue to deliver the high earnings growth that would
justify their current high p-e multiples.
This uncertainty about the future as well as some early earnings
warnings by some of these companies has driven market prices down. Two
companies, Microsoft and Intel, because of their relative high market
capitalizations tend to influence the NASDAQ significantly. While both
started the year off very strong - Microsoft has stalled recently in a
"trading range" in the high 90's whereas Intel has dropped nearly 20%
from its previous high reached earlier this year. The first quarter
tends to be a tough one for technology companies as uncertainty
predominates about future earnings...first quarter earnings due out
next month for many of these companies will be a key signal to watch.
In short, I think the divergence you mention between the S&P 500 and
NASDAQ can be largely explained by the weak performance lately of the
technology sector (especially some key companies with large market
caps).
------------------------------
Date: Wed, 19 Mar 1997 17:51:23 -0500 (EST)
From: "L & R Seely" <LJS_RTS@msn.com>
Subject: mortage loan types: fixed vs ARM, bank vs mortgage company
We are first time home buyers! I knew that this would be a very demanding
decision to make, but I have honestly been overwhelmed at the complexity of
shopping for mortgages, not to mention picking the right house. I am
concerned about the fixed vs. ARM question! I had read that ARM's are
good if you think you might not stay in your house for more than 5 years.
But who can know with certainty what the future holds for their career or
family situation?
My other question concerns where we get this loan. My local bank has low
closing costs and an attractive no points, 1/4 point origination fee
fixed rate 30 year. I know I can get the interest rate a little lower
1/8 to 3/8 lower elsewhere, but will encounter several possible downsides
(higher closing costs, possible "junk fees", the company will sell my
loan as soon as we close, and points to pay)
We are willing to use all of our savings to put down 10%, so we
definitely want a conventional, not a FHA loan.
Any help you can give would be appreciated.
------------------------------
Date: Wed, 19 Mar 1997 17:52:41 -0500 (EST)
From: Gregg Sporar <greggsporar@compuserve.com>
Subject: Umbrella insurance Question
I've recently been considering buying an umbrella policy to
supplement the coverage provided by my homeowner's and
auto policies. Does anyone have any tips or suggestions?
What kinds of exclusions do the insurance companies put in
that I should watch out for?
Thanks,
Gregg Sporar
------------------------------
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