Go to Jeff Salisbury LWGate Home Page.From: persfin-digest <owner-persfin-digest@shore.net>
Subject: persfin-digest V4 #142
Date: Tue, 31 Mar 1998 20:45:12 -0500 (EST)
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persfin-digest Tuesday, March 31 1998 Volume 04 : Number 142
IN THIS ISSUE:
Discount brokers: There's No Free Lunch
Re: Federal Taxes on Stock Gift
ADVERTISEMENT: MCI FAX BROADCAST SERVICE
Federal Taxes on Stock Gift
Re: emergency cash question
Re: Decompression software for the Mac to read Persfin?
Re: decompression software for the Mac
Re: Taipan
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Date: Tue, 31 Mar 1998 19:48:24 -0500 (EST)
From: David Martin <dmartin@seabreeze.hc.ti.com>
Subject: Discount brokers: There's No Free Lunch
There has been some discussion recently about the fees at
discount brokers approaching zero. Don't forget that there is no free
lunch; it does cost a certain amount of money to execute a stock
trade, and the brokerage intends to make a profit somehow. One factor
is that quite often the brokerage is the one buying and selling the
stock from/to you, and I have heard that a brokerage may offset the
smaller fee with slightly higher buy prices and lower sell prices. So
you may lose on price what you gained in a lower fee. Of course, if
you tell them to buy a stock once it goes below $X or to sell once it
goes above $Y, it may not matter to you vey much. But it is something
to keep in mind.
-David Martin
(Editor's Comment: An excellent point. Getting the best execution on a
trade can often offset any savings on commission. One strategy to prevent
manipulation of buy and sell prices is to place limit orders, say at the
bid price when you buy or at the ask price when you sell. Comments? -IK)
------------------------------
Date: Tue, 31 Mar 1998 20:30:12 -0500 (EST)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Federal Taxes on Stock Gift
>I received a gift of stock from my parents in late December 1997. The
>price of the stock on the date of transfer was $41/share. In February I
>sold 200 shares for $55/share. How would I figure the federal income tax
>on this transaction?
You'll need to find out what your parents paid for it. In general,
the basis of a gift is the basis in the hands of the giver (the primary
exception is when the giver is holding the asset at a loss on the day
it is given away). You also get your parents' holding period. So if
your parents paid $10 per share for it, you have a gain of $45 per
share, for example. See IRS Pub 551 for the gory details on basis
of gifts.
Since you pick up your parents' holding period, the odds are that the
stock was held for more than 18 months. Therefore, the gain will be
taxed at the 10%/20% rate (10% if your tax bracket is 15%, 20%
otherwise).
To actually report all this, you'll use Schedule D when you file
your 1998 taxes in April 1999.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Tue, 31 Mar 1998 20:32:56 -0500 (EST)
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------------------------------
Date: Tue, 31 Mar 1998 20:33:23 -0500 (EST)
From: kafer@crl.com
Subject: Federal Taxes on Stock Gift
Rick--
See IRS Pub 17, pages 101, 108. If you try to do your own taxes and you
have a situation much more complicated than a simple 1040A or 1040, you
should get and read Pub 17 every year. As you sold in February 1998, you
have a year to worry about this; it does not affect your 1997 taxes.
However, your parents may have to file a gift tax return, depending on the
amount of the gift--more than $10,000 if one gave you the gift or $20,000
if both gave you the gift.
Pg 101: To figure the basis of property you get as a gift, you must know
its adjusted cost basis to the donors (your parents) just before the
property was given to you. You also must know its fair market value (FMV)
at the time it was given to you and any gift tax paid on it.
If the FMV were less than the donors' adjusted basis, your basis for
figuring the gain on its sale is the donor's adjusted basis plus or minus
any required adjustment to basis while you held the property. [Since you
made a profit in the time period you held the stock, the rest of the
paragraph does not apply.]
If the FMV were equal or greater than the donors' adjusted cost basis, your
basis for figuring gain or loss on the sale is the same as the donors'
adjusted cost basis at the time you got the gift. Increase your basis by
all or part of the gift tax paid, depending on the date of the gift. (You
had better see Pub 17 or a tax preparer on this gift tax adjustment; it is
complicated.)
Also, for figuring gain or loss from the sale, you must increase your basis
(the donors' basis) for any required adjustements to basis while you held
the stock.
Sorry to tell you this-- If your parent gave you appreciated stock, the
cost basis for your gift of stock is the adjusted cost basis of your
parents just before the gift. Probably the cost of the shares adjusted by
any commissions paid or you adjust the cost basis by commission you paid
for the sale, depending on how the broker reported the sale on the 1099-B,
gross or net.
Pg 108: If you receive a gift of property and your basis is determined by
the donor's basis, your holding period started the day the donor's holding
period started. If your holding period is determined by the fair market
value (FMV), your holding period starts on the first day after the date of
the gift.
The term of your holding period, short-term or long-term, depends on the
basis. So, you need to know when your parents bought the stock and the
price they paid.
Frank, Tax-Aide, AARP Tax Counseling for the Elderly
- -------------------------
>I received a gift of stock from my parents in late December 1997. The
>price of the stock on the date of transfer was $41/share. In February I
>sold 200 shares for $55/share. How would I figure the federal income tax
>on this transaction?
==================== message separator ==============
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Date: Tue, 31 Mar 1998 20:34:13 -0500 (EST)
From: David Martin <dmartin@seabreeze.hc.ti.com>
Subject: Re: emergency cash question
Juli writes:
>I was leaning towards keeping it in my money market, but what would the
>pros and cons be of making additional coupon pmts instead?
Well, once you make the extra payment, it is a lot harder to
get it back. Also, what if they "forget" that you made some extra
payments? I would keep the money in a safe money market fund. You
won't earning as much as the mortgage is costing interest-wise, but
since in your plan, you aren't making payments against the principal,
you wouldn't be cutting your interest cost anyways.
-David Martin
------------------------------
Date: Tue, 31 Mar 1998 20:41:17 -0500 (EST)
From: WDStancil <WDStancil@aol.com>
Subject: Re: Decompression software for the Mac to read Persfin?
> What software do I need to decompress or open the files so I can read the
> info sent to me. I have a Mac Performa 475 with a 25 mhz CPU.
> El3sal@aol.com
It's just a text file - choose "Download Now" if it is too big to read
online.
------------------------------
Date: Tue, 31 Mar 1998 20:43:14 -0500 (EST)
From: RLevitz42 <RLevitz42@aol.com>
Subject: Re: decompression software for the Mac
>What software do I need to decompress or open the files so I can read the
>info sent to me. I have a Mac Performa 475 with a 25 mhz CPU.
> El3sal@aol.com
Alladin's StuffIt Expander(TM) will decompress almost any file you get
including zip files. I believe a shareware version is available in the
AOL software library. Mime files my require an internet browser (i.e.
Netscape) to open.
Robert Levitz
------------------------------
Date: Tue, 31 Mar 1998 20:44:03 -0500 (EST)
From: Zain Shammas <SHAMMAS.ZAIN@ntrs.com>
Subject: Re: Taipan
Someone asked about Taipan. I believe they also publish under the name of
the Oxford Club or something like that. Well, it's a newsletter; take
their opinions, recommendations and claims with a grain of salt.
------------------------------
End of persfin-digest V4 #142
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