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Subject: persfin-digest V4 #22
Date: Sun, 13 Apr 1997 20:53:33 -0400 (EDT)
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persfin-digest Sunday, April 13 1997 Volume 04 : Number 022
IN THIS ISSUE:
ADVERTISEMENT: LAN ACCESS TO MCI MAIL [Oppenheimer Software <Connect-Sal]
Re: 403(B) / Gold Coins / Paying Estimated Tax / Capital Gains [William ]
Re: Title Insurance / Leaving Estate to Children / Stock Split Timing [Ha]
Re: Historical Stock Prices Site / Paying Estimated Tax [Harry Matthews <]
Bonds vs. Bond Funds [David Martin <dmartin@seabreeze.hc.ti.com>]
requesting contact from plan administrators [Elizabeth Clawson <fpc@net66]
Another capital gains tax bracket question ["Mark Hamann" <hamann@myk.ilc]
Re: Advanta CD [georgene@psyberlink.net (Georgene Harkness)]
Re:Tuition Deduction ["Steven M. Foulks" <sfoulks@nmu.edu>]
Old stock/bond certificates? ["Steven M. Foulks" <sfoulks@nmu.edu>]
Power-of-attorney? [eric <73354.3477@CompuServe.COM>]
Setting the Inheritance Record Straight [Jacqueline.D.Richardson@Hitchcoc]
Re: Maximum 401(k) contribution [johnel@ix.netcom.com]
Quicken and 403B Accounts [Jack Law <jlaw@oz.kis.net>]
Re: % Of Berkshire Hathaway's Portfolio In Bonds? [Bill La Mar <blamar@di]
ATT True rewards? [eric <73354.3477@CompuServe.COM>]
AT&T-LU treatment in Quicken ["Peter Staecker" <staeckep@macom.com>]
Re: Talking to IRS [Harry Matthews <matthews@panix.com>]
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Date: Sun, 13 Apr 1997 20:16:26 -0400 (EDT)
From: Oppenheimer Software <Connect-Sales@mcimail.com>
Subject: ADVERTISEMENT: LAN ACCESS TO MCI MAIL
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------------------------------
Date: Sun, 13 Apr 1997 20:18:14 -0400 (EDT)
From: William Jones <bill.and.ginny@worldnet.att.net>
Subject: Re: 403(B) / Gold Coins / Paying Estimated Tax / Capital Gains
1. CATHY STEINBERG asked about a 403(b): Suppose your employer makes an
additional contribution to your account so that the total figure exceeds
$9500. Is this a problem?
Answer: Usually not. Section 415(c)(1) applies, which says that the
maximum annual addition is the lesser of $30,000 or 25% of the
participant's compensation. "Annual addition", per 415(c)(2), means
the sum of the employer's contribution, the employee's contribution,
and forfeitures. The $9,500 limit is on the employee's contribution.
However, check with your Personnel Dept to be sure of the limits.
2. SUSAN MANGIERO asked about buying gold coins: Is there a difference
in price other than that based on weight?
I suggest she avoid American gold eagles, because they have a premium
in addition to the cost of the gold, and Krugerrands, because they are
harder to unload. Generic gold coins are fine. They should be 1 ounce,
not 0.8 ounces. A friend of mine once bought 12 of them for $12 each
over spot, and the dealer agreed to meet her at the bank where the safe
deposit box was so as to avoid the worry about carrying them from the
store to the bank. I recommend insisting on the same consideration.
3. PAUL FAN asked: Will the IRS object if instead of paying estimated
taxes, I have my employer deduct more for taxes the last two or three
months of the year?
I usually cannot tell just how much I should have withheld until the
latter part of the year, so almost every year I have my paycheck
withholding increased or decreased around September. I can then
estimate it well enough to come out to me owing between $100 and $400.
This avoids all penalties and all paying of estimated taxes.
4. THE MERCENARY says that, to get your own title insurance, you would
need a second policy.
When I got my mortgage, I insisted on getting the title insurance in
my own name. There was no extra charge, and the bank did not insist
on a second separate policy. I paid off the mortgage some years back,
but the title insurance will protect me until I sell the house. If it
were not in my name, it would only protect the bank's stake in the
house, not my own.
5. LEONARD SPOTO asked if all capital gains can be written in to
line 13 without using Schedule D.
Answer: Yes, if all were reported on a 1099-DIV, otherwise not.
From: Bill Jones bill.and.ginny@worldnet.att.net
------------------------------
Date: Sun, 13 Apr 1997 20:23:07 -0400 (EDT)
From: Harry Matthews <matthews@panix.com>
Subject: Re: Title Insurance / Leaving Estate to Children / Stock Split Timing
> From: "Edward R. Fickenscher" <grants@cs.wustl.edu>
(Evaluating Title Insurance Policies)
Title insurance companies exist primarily to protect lenders from
unexpected claims, though buyers are, perforce, covered as well.
"Independent title search" would be a more accurate description of their
services. Paying for title insurance (like paying for the lender's
lawyers) is simply another expense that lenders dump on buyers. The
only solution I can suggest is moving to a state where title
registration requirements are stiff enough to salve the fears of
lenders. In New York, for instance, title insurance is required when a
transaction involves land, but not for condominium sales or similar
transactions.
>(Whether it's desirable to leave a large estate to children.)
As the son of a divorced couple, I can provide some first-hand
information. As a general rule, an individual gains considerable tax
advantages if he or she leaves the bulk of an estate to his or her
spouse at the time of death. Thus, though my father died a wealthy man,
I got nothing directly from him, since the estate went almost entirely
to my step-mother, who qualified for the very valuable "spousal
exemption." This is even more valuable in a community property state.
Moving into the next generation, though, life gets more complicated. My
grandmother, who died recently, left a variety of trust funds, each of
which paid a prescribed amount to one grandchild on her death. She also
specified that her residual estate (which involves a lot of complicated
sales and evaluations) was to be distributed equally among the
grandchildren, with certain funds reserved to provide income to her
surviving son and daughters-in-law.
The options are numerous, so the advice of competent lawyers and
accountants is clearly essential. Among other facts to consider: the
estate is taxed, but the bequests are tax-free to the recipients.
> Mary Thompson asked whether to buy a stock before or after a
> split...
There was a time when some companies -- Procter & Gamble foremost among
them -- felt that having their stock widely held was essential to
corporate stability. As a result, their Boards of Directors routinely
voted stock splits when the share price reached or approached an
arbitrary figure ($100 in the case of P&G; by way of contrast, IBM never
split and kept share values at $300, $400 or more). The stock was kept
affordable, but whenever a stock in question approached the "magic"
figure, speculative fever went wild. My entire sophomore year in
college was financed by a 30% run-up (from $85 to $100 a share) in the
stock.
------------------------------
Date: Sun, 13 Apr 1997 20:25:19 -0400 (EDT)
From: Harry Matthews <matthews@panix.com>
Subject: Re: Historical Stock Prices Site / Paying Estimated Tax
> From: "Jackson, Anthony D." <JacksAD1@central.ssd.jhuapl.edu>
> Subject: Historical Stock or Mutual Fund prices Web Site?
There are services that offer historical quotes for individual stocks,
but they cost big bucks. A few ways to get around this hassle: use one
of the zillions of tax/financial software packages available (for online
failing is necessary); file via FedEx or one of its competitors (now
recognized as meeting the deadline); have your financial software
track speculative as well as actual transactions for your portfolio. If
you're thinking long-term, any of these approaches should help.
> From: Paul Fan <fan@math.ucla.edu>
> Does IRS care if I pay taxes by deductions or by estimated tax?
I don't have the form number handy, but there is one that permits you to
calculate your taxes due and payments made by quarter. If the figures
show that you do not owe penalties for any specific calendar quarter,
you can avoid penalties, though it will take a lot of paperwork and
research.
------------------------------
Date: Sun, 13 Apr 1997 20:34:43 -0400 (EDT)
From: David Martin <dmartin@seabreeze.hc.ti.com>
Subject: Bonds vs. Bond Funds
Lester writes:
>The reality is that for the last 20 years, both stocks and bonds have
>largely been driven by interest rates, and that both have moved rather
>synchronously, with longer term bond prices rising and falling to a
>greater extent than more short-term issues. Indeed, in recent years the
>best performing bond funds have been those invested in "junk" bonds.. so
>much for safety. Having been whipsawed several times by investing in
>supposedly safer bonds, I have concluded that the greater growth in
>stock values is virtually essential at all ages to protect against the
>ravages of inflation and taxes.
This is true if you invest in bonds through a bond mutual
fund. However, if you buy a bond itself and hold it to maturity, then
you will get exactly the interest you expect. For example, if you
retire at age 65 with $1 million in savings and invest it in a bond
paying 5% per year, you will get $50,000/year. The problems arise if
you need access to more money and need to sell the bond, in which case
the market value may have gone down due to interest rate fluctuations.
I have left out the issues of taxes, commission expenses, and
the risk of a default. If you buy a US Treasury bond directly from the
government, these are usually not serious problems.
-David Martin
(Editor's Comment - You also left out inflation, which *is* a potentially
serious problem. The $50,000 a year loses purchasing power as inflation
continues. -IK)
------------------------------
Date: Sun, 13 Apr 1997 20:35:07 -0400 (EDT)
From: Elizabeth Clawson <fpc@net66.com>
Subject: requesting contact from plan administrators
Dear Readers,
I am conducting research for a article and need a few minutes worth of
time from corporate plan administrators (who are in-house rather than
third party contracted) of 401(k) and 403(b) retirement plans to get a
picture of the benefits environment as a result of 404(c). This can be
done with a e-mail with phone number. Hope to hear from you.
Thank you.
Elizabeth Clawson, CPA fpc@net66.com
------------------------------
Date: Sun, 13 Apr 1997 20:35:29 -0400 (EDT)
From: "Mark Hamann" <hamann@myk.ilc.or.jp>
Subject: Another capital gains tax bracket question
Hello Persfiners,
I am a U.S. citizen on an overseas assignment and I have a tax question. I
believe that by using form 2555, up to $70,000 of my foreign income is
excludable from my U.S. taxable income. This puts me into a lower tax
bracket (0%). Do capital gains which I still pay taxes on in the U.S. get
taxed at 0% (until the standard deduction) or do they get taxed at what
they would have been taxed at if I didn't use form 2555?
If they are taxed at 0%, then is it advisable to sell everything that went
up in the December before I return and then start over with a better cost
basis?
Thanks,
Mark Hamann
------------------------------
Date: Sun, 13 Apr 1997 20:36:08 -0400 (EDT)
From: georgene@psyberlink.net (Georgene Harkness)
Subject: Re: Advanta CD
>
>One bank that they list for my area (West Virginia) is Advanta National
>Bank which is paying 6.2% for a 1 year CD and the site gives an 800 number
>for them. I'm a bit nervous investing with a bank that I've never heard of
>and that my only contact is an 800 number.
Advanta recently purchased my Colonial National Bank credit card.
Other than that, I can't vouch for them. Colonial had been in
business for some time. I think Advanta's pretty large, though.
>
>Has anyone invested with a bank over the phone or have any knowledge of
>Advanta National Bank? Also does anyone know of a source that can beat 6.2%
>on a one year CD?
I don't know about beating your 6.2, but I get 6.01 Annual Percentage
Yield (that's 5.85 uncompounded) on my Signet Sim+ checking account.
Minimum balance 2,500, unlimited free checking and no minimum size on
checks. Also, the money's available when **I** want it, not when they
say I can have it.
------------------------------
Date: Sun, 13 Apr 1997 20:37:35 -0400 (EDT)
From: "Steven M. Foulks" <sfoulks@nmu.edu>
Subject: Re:Tuition Deduction
>From: "Timothy D. Brown" <0002105445@mcimail.com>
>
>Could one of the resident tax experts answer this question? When I
>itemize for tuition, books, miscellaneous, the IRS demanded I submit
>the 2106 as support for Schedule A. Did I miss where I need to identify
>deductions as education expenses? 2106 seems to deal more w/ travel
>expenses. Thx
>(Editor's Comment - Education expenses are only deductible if they're
>specifically required for your current job. Tuition for education to
>qualify for a new career is not deductible. There are gray areas here,
>like a legal assistant going to law school, so consulting the latest IRS
>rulings would help. -IK)
Tuition would be deductible on line 4 of 2106 as would books fees, etc.
The other costs associated with education would be deductible on line 1
through 3.
Ira's comments are correct but there is more and I can tell you that I am
an expert in this area (the IRS has audited me personally 3 times because
of my educational expenses). I should tell you that the IRS scrutinizes
these expenditures carefully because taxpayers often make mistakes in this
area. There has been a lot of litigation in this area so the law is pretty
well established.
First, as Ira indicated they must be related to an "existing" occupation.
In addition the expenses must be "ordinary and necessary" in that
profession. For example taking a course in English, if you are a CPA
working on a masters degree would probably not be ordinary. This was a
contentious issue in my first audit.
If you qualify don't overlook travel and transportation, although travel
will only be deductible if you maintain a permanent tax home apart from
where you get your education.
------------------------------
Date: Sun, 13 Apr 1997 20:38:23 -0400 (EDT)
From: "Steven M. Foulks" <sfoulks@nmu.edu>
Subject: Old stock/bond certificates?
A student of mine brought some very old stock/bond certificates to class
(Personal finance) the other night from companys that we weren't familiar
with and wondered where he could find out information about their value. I
was at a loss. I remembered when I work as an auditor in the brokerage
business for Arthur Andersen & Co that there was a firm that specialized in
finding out about such companies but it was too many years ago to remember.
Can anyone help us out?
Steven M. Foulks, CPA, CFP, PhD
Professor of Accounting & Finance
Northern Michigan University
www.nmu.edu/instruct/business/sfoulks/sfoulks.html
------------------------------
Date: Sun, 13 Apr 1997 20:39:21 -0400 (EDT)
From: eric <73354.3477@CompuServe.COM>
Subject: Power-of-attorney?
My wife and I are considering setting up a power-of-attorney with my
son (an atty) to handle financial matters in the event both of us are
temporarily incapacitated, auto accid. etc. We already have durable
power-of-attorneys. Any comments?
------------------------------
Date: Sun, 13 Apr 1997 20:40:58 -0400 (EDT)
From: Jacqueline.D.Richardson@Hitchcock.ORG (Jacqueline D. Richardson)
Subject: Setting the Inheritance Record Straight
Bill Jones wrote
In support of John Leipold's response to J.D. Richardson, who asked how to
protect a large estate for the kids:
I agree that one should spend most of it, leaving just a few hundred thousand
to the kids. <snip>
- ----------------------
I'm J. D. Richardson and I wasn't going to respond to these posts, but I just
need to set the record straight about my original post because it seems it has
been twisted out of shape.
I am NOT trying to protect a big estate for the kids. If you will reread my
post, I am working hard to stash away a good retirement for ME.
Since I can't time the event of my death I can't just blow it all on a spend
thrift type of retirement (but I AM planning on enjoying it!), so there will
probably be some left when I eventually die.
The **main question** in my post was how to set something up to protect what I
do leave behind so my two sons get to keep it and it doesn't get lost in a
divorce. All the talk on this list about divorce rates had prompted that
question because it had been on my mind and I thought it would be a good time
to ask the question. What little I leave I want my sons to have and NOT their
former wives.
So, if anyone would care to address that, I would appreciate it. (Thanks to
those that have already sent me some good references on the topic - it has been
helpful in getting me started.)
jackie
------------------------------
Date: Sun, 13 Apr 1997 20:42:20 -0400 (EDT)
From: johnel@ix.netcom.com
Subject: Re: Maximum 401(k) contribution
*Your* maximum personal contribution is limited to $9500. If your employer
contibutes in addition to your $9500, that's gravy for you.
An employer-matching 401(k) is the best thing going out there, and the best
thing you can do is get as close to the $9500 max as your finances will allow.
Also, *don't* choose "safe" bond funds or less aggressive income or balanced
funds. In the long term, the risk decreases and you negate the ravaging effects
of inflation by going for more aggressive, fully-invested stock funds.
Good luck!
John Leipold
------------------------------
Date: Sun, 13 Apr 1997 20:42:53 -0400 (EDT)
From: Jack Law <jlaw@oz.kis.net>
Subject: Quicken and 403B Accounts
This is a question for all the Quicken experts. I have a 403B account with
Lincoln Life. Like most 403B providers, they allow the investor to switch
back and forth between various equity, bond, and money market funds. I
think the fund operates like a mutual fund which assigns units of the
various funds to the investor. I invest in the fund by having a set amount
deducted from my bi-monthly paycheck. Lincoln Life then allocates the
amounts bi-monthy to my accounts. How do I set up Quicken account(s) to
track the various fund performances? How do I track the percentage returns
that I am making from each fund? I have only used Quicken so far to track
my checking account, so I am a novice when it comes to using the program.
I am currently using Quicken version 5.0 for the mac. I would appreciate
any help the knowledgeable list members could provide.
Thanks,
Jack Law
------------------------------
Date: Sun, 13 Apr 1997 20:43:45 -0400 (EDT)
From: Bill La Mar <blamar@dialnet.net>
Subject: Re: % Of Berkshire Hathaway's Portfolio In Bonds?
<<<(Editor's Comment - I like bonds in a portfolio (so does Warren
Buffett, so I'm not in such bad company).>>>
Does any one know what % of Berkshire Hathaway's portfolio is in bonds?
I know that by law most of GIECO and the other insurance companies
portfolios are in fixed income and term investments, but Warren does not
control those investments.
Thanks,
Bill
- --
Bill La Mar, Springfield, MO
------------------------------
Date: Sun, 13 Apr 1997 20:45:43 -0400 (EDT)
From: eric <73354.3477@CompuServe.COM>
Subject: ATT True rewards?
When you try to redeem points, you will learn all about the
restrictions and limitations. Each dollar "value" = 40 pts. (But they
won't even tell you that.) Then you'll hear about the restrictions on
whatever item you want to redeem for.
(Editor's Question - Can you redeem the points for cash? -IK)
------------------------------
Date: Sun, 13 Apr 1997 20:46:44 -0400 (EDT)
From: "Peter Staecker" <staeckep@macom.com>
Subject: AT&T-LU treatment in Quicken
Help requested from Quicken mavens:
I'm not sure I'm handling the AT&T - Lucent spinoff properly in
Quicken. Here's what I did (portfolio register):
1. stock split (SS: 1.3239 for 1) for AT&T which increased the number
of shares.
2. move shares (MS) into Lucent (the .3239 fraction) at my Lucent
basis (see Motley Fool FAQ for details on all the arithmetic).
3. move shares out of AT&T (the same .3239 fraction).
Well, that transfers the shares, but when I look at the Security
Detail for AT&T, it sez I SOLD them on the move shares date (ie, a
taxable event).
Is the fix simply to make sure these AT&T shares move over at my
original cost basis and let the program take care of the arithmetic?
Or is there a better way?
Thanks,
Peter
------------------------------
Date: Sun, 13 Apr 1997 20:48:14 -0400 (EDT)
From: Harry Matthews <matthews@panix.com>
Subject: Re: Talking to IRS
> From: Frank Wagner <wagner@ececs.uc.edu>
> Subject: Talking to the IRS
>
I'm neither an accountant nor a tax lawyer, but I've had friends in
various forms of distress with the IRS. The agency does allow a
taxpayer to bring any advisor of his or her choice to an audit or
conference (though the appropriate letters after a name do add
credibility) and will talk, at least on an informal basis, with any
representative on the phone.
On the basis of my friends' experience, though, I should warn you that
IRS agents have the power only to negotiate payment schedules and waive
penalties. They cannot reduce taxes due or waive interest payments,
once a taxpayer accepts a settlement. If, as you imply, your friend
accepted the agency's assessment of his tax bill and the bankruptcy
judge (following the law) refused to discharge it, there's no way to
escape it, plus accrued interest. (Even death is not an out; the IRS
would have first claim on his estate.) I'd suggest sharply increasing
the monthly payments to get rid of the liability (and the rapidly
accumulating interest) as soon as possible.
Keep in mind what we pay IRS agents to do: collect taxes. They're not
monsters, but they have this job description....
------------------------------
End of persfin-digest V4 #22
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