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Subject: persfin-digest V4 #148
Date: Sat, 18 Apr 1998 20:46:31 -0400 (EDT)
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persfin-digest Saturday, April 18 1998 Volume 04 : Number 148
IN THIS ISSUE:
ADVERTISEMENT: MCI FAX BROADCAST SERVICE
Cap Gain for Spouse?
re: How Do I Purchase Strips, T-Bills, T-bonds
Tax consequences of interfamily loan?
Re: Long distance phone service - Sounds like MLM
Cellular Service Change in NYC?
Re: Getting Started
Re: Annuities - Good Deal?
RE: Roth IRA
Re: Roth IRA
House Buying Question
re: closed end funds
Continue Term Life Policy?
Enhanced Dollar Cost Averaging?
Re: : Zero Coupons?
LT Cap Gains Rate?
Re:Double Interest on Refi's
Tax Deduction For Employing My Son?
IRS quarterly estimates
Credit card interest calculations
Long distance ph service
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Date: Sat, 18 Apr 1998 20:07:27 -0400 (EDT)
From: Oppenheimer Software <Connect-Sales@mcimail.com>
Subject: ADVERTISEMENT: MCI FAX BROADCAST SERVICE
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------------------------------
Date: Sat, 18 Apr 1998 20:08:01 -0400 (EDT)
From: Wai Poon <wpoon@me.umn.edu>
Subject: Cap Gain for Spouse?
Tax time!
I moved to another state for job last year and my wife remained behind for
now. I have to file tax returns for three states this year (former+
current living state+working state). Since she still lives and works in
the former state, I think we need to file our returns separately.
I need to know how to treat the capital gains of our investments.
Currently, all the investments use my SS as taxpayer ID. Since we are
filing separately and my income is much higher than hers, I think it's an
advantage to split the gain between us. I don't remember where I read it,
but a split is allowed and no form is needed if the recipient is your
spouse. Is this true? If so, can I declare 50/50 between us?
Thanks.
Wilson Poon
------------------------------
Date: Sat, 18 Apr 1998 20:08:23 -0400 (EDT)
From: Fred Schiff <fschiff@banet.net>
Subject: re: How Do I Purchase Strips, T-Bills, T-bonds
You can buy these things through a broker, but is much easier
to use the Treasury Direct.
http://www.publicdebt.treas.gov/sec/sectrdir.htm
Fred Schiff (fschiff@banet.net)
------------------------------
Date: Sat, 18 Apr 1998 20:08:50 -0400 (EDT)
From: John Wallace <JWallace@karta.com>
Subject: Tax consequences of interfamily loan?
I wonder if somebody could help me unravel the Tax consequences of the
following scenario: My elderly mother (90 years old) and myself are the
only trustees and the only living beneficiaries of a Trust fund that was
set up when her father died about 50 years ago. Most of the assets are
in stocks, CD's etc.; she gets the income for life, and when she passes
away, I will get the principal. Our lawyer has assured us that all
estate taxes, etc were paid at the time the trust was established, and
that transferring the assets to me will just involve changing the names
on the stock certificates, with no tax consequences (other than Capital
Gains) as if I had owned the stocks from day one. Currently, the income
from the stocks, etc. passes into the Trust and then gets 100%
distributed to her so that, in a normal year, the trust pays no income
tax and she pays personal income tax - but she is in a very low tax
bracket.
She & I have recently agreed to use some of the Trust assets now to
enable me to buy a house, and the question is: How to handle this
without incurring problems with the IRS ? It seemed to me that the
simplest thing would be for the trust to make an unsecured loan, [assume
$70K] with an indefinite term, to me & my wife in exchange for a
written promise to pay interest to the trust at competitive rates (I was
thinking of about 7%), and the trust would distribute that money to her
just like the stock dividends; then I would use the loan to buy a house
for cash. But then I got to wondering if it would be better for the
Trust to somehow issue a Mortgage on the house so that my "mortgage
payments" to the Trust would be tax-deductible for me. But I am not in a
really high tax bracket either (gross income = $60K for a family of 4)
and so maybe it is not worth risking complications with Big Brother,
just to save a few bucks.
Any comments will be greatly appreciated. TIA jwallace@karta.com
------------------------------
Date: Sat, 18 Apr 1998 20:15:43 -0400 (EDT)
From: GeorgeS <pip@shore.net>
Subject: Re: Long distance phone service - Sounds like MLM
>I have 8.9 cents per minute on a dial-around number with no monthly
>fee. See my link from <spam deleted>
Look closely at this fellow's web site and you realize you have to submit an
authorization form with his sales agent number on it.
To me this whole deal stinks of an MLM marketing scheme.
If so, I'd advise against any purchase that is based on MLM. Great MLM
schemes of the past include Amway (sold a skin product that took off the
skin along with the stink) and Amsoil (sell an overpriced synthetic oil that
the never bothered to API certify, thus voiding all your power train
warranties).
------------------------------
Date: Sat, 18 Apr 1998 20:16:15 -0400 (EDT)
From: "Gary M. Oppenheimer" <GOPPENHEIMER/0002180241@mcimail.com>
Subject: Cellular Service Change in NYC?
I'm looking to switch from AT&Ts analog service to a PCS service in the
NY metro area.
Trying to compare AT&T, Sprint, OmniPoint and Bell Atlantic is resulting
in a mind meltdown.... they are not easily compared.
I'd appreciate any personal experience (good or bad) or other guidance
with any of these services that might help to act as a tie breaker.
Thanks,
Gary Oppenheimer
2180241@mcimail.com
------------------------------
Date: Sat, 18 Apr 1998 20:17:13 -0400 (EDT)
From: David Martin <dmartin@seabreeze.hc.ti.com>
Subject: Re: Getting Started
Robert writes:
>Subject: Getting Started... I just bought a condo, I'm paying off
>piles of bills, etc. Besides my 401k, I have no investments. I
>realize I need to start somewhere, and at this point I'm going to have
>to start small. $50 a month is about what I can spare for investing.
>Any thoughts on where I should put it? My tax planner said a Roth
>IRA. While I agree that sounds like a great idea, I'd like to invest
>for the near future, say 5-10 years versus my retirement. Any
>thoughts?
Before you do anything else, you should save up about 6 months
of living expenses and put it into either a bank account or a money
market account (I recommend the Vanguard ones). You usually need about
$1000 to $3000 to open up a money market account, so you may need to
use a bank account at first.
-David Martin
------------------------------
Date: Sat, 18 Apr 1998 20:21:07 -0400 (EDT)
From: "Cal Lester" <cal_lester@email.msn.com>
Subject: Re: Annuities - Good Deal?
>From: PowellFamily <PowellFamily@tri-countynet.net>
>Subject: Annuities - Are They a Good Deal?
>
>Several older friends have told me to stay away from annuities. They
>said they will never be able to get all their money out. Other sources
>have said this was a good way to accumulate money tax-deferred.
>>>> Sherri, unfortunately you neglected to list your age. Was that an
oversight or deliberate L.O.L.
Seriously though, Annuities are contracts designed to provide an Income
that you can NOT outlive. Traditionaly one gives an Insurance company a
sum of money, lump sum or over a period of years. In exchange the company
pays the Annuitant interest on the money until such time as it annuitized.
The Internal Revenue Service has decreed that the INCREASE in the account
will NOT be taxed until it is removed from the policy.
Therefore it DOES grow Income Tax deferred. The IRS puts a penalty on
that provision, in that any funds removed from the account PRIOR to your
age 59 1/2, will be taxed at your present income tax rate
PLUS a 10% penalty for early withdrawal. In addition the company will
probably have some early withdrawal penalties too.
As to the second portion of your question above, YES it is an excellent
way to ACCUMULATE Income Tax Deffered money.
>
>I'm looking for a way to invest tax-deferred, yet be able to get to it
>before retirement age without penalty. Am I dreaming or is there a way
>of doing this with a good enough return to make it worth my while?
What will your retirement age be?? If it is after 59 1/2,
AND after the company penalty period (normally 7 to 10 years),there will
be NO PENALTY. However all or part will be income taxable.
IF you Annuitize, (take the money over a period of time), then a PORTION
of each payment will be considered a "return of premium" NON TAXED, and
the balance "gain" taxable.
There are other vehicles that enjoy the SAME Income Tax Deferral, however
the Cash Value could be availble to you INCOME TAX FREE ! ! ! ! !
If you have any additional questions, do not hesitate to contact me.
Kalman J. Lester CLU
Insurance Course Coordinator
Broward Community College
Cal_Lester@msn.com
------------------------------
Date: Sat, 18 Apr 1998 20:23:35 -0400 (EDT)
From: Jim Garcia <jimgarci@pacbell.net>
Subject: RE: Roth IRA
> On April 2nd Rich Carreiro <rlcarr@animato.pn.com> wrote:
>>
>> (2) Because of the current state of the law, you will want to put
>> your conversion into a different account than the account you
>> make annual Roth contributions into (can be the same fund company, can
>> even be the same fund, just a different account). In fact, you'll
>> find that many funds will simply refuse to let you make contributions
>> to a Roth account funded by a conversion.
>
> Rich,
> I am confused as to what this means. Does this mean that if my wife and I want
> to convert existing traditional IRAs to Roth IRAs during 1998, we cannot make
> contributions to the new Roth IRAs during 1998 and beyond? ...... Wade
>
You can open a Roth IRA for 1998 and put in your $2000.
BUT, when you convert your existing IRA, it will be a different account
number. You will have two Roth IRAs, one for 1998 and a conversion Roth
IRA. I think that this is done for taxation purposes because you can
take up to 4 years to pay the taxes due on the conversion IRA if you
convert in 1998. Jim Garcia jimgarci@pacbell.net
------------------------------
Date: Sat, 18 Apr 1998 20:25:35 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Roth IRA
>
>I am confused as to what this means. Does this mean that if my wife and I want
>to convert existing traditional IRAs to Roth IRAs during 1998, we cannot make
>contributions to the new Roth IRAs during 1998 and beyond? The reason I ask is
No, it means that the conversion will go into Roth Account A and contributions
will go into Roth Account B. The reason is that any account that has
*conversion* money in it will suffer some penalties when taking the
money out within 5 years of the last date conversion money went into
the account.
However, you are allowed to take out *contributions* with no tax consequences
at any time. You could in theory put everything in one Roth IRA account,
but the paperwork would be evil to figure out what taxes and penalties
would be on a distribution made within 5 years of the conversion on
such a "mixed" account. Because of this, many fund companies are
simply refusing to allow Roth contributions to be made to any
account that was funded via a conversion. You have to open
a separate Roth account for annual contributions.
>know if it would be worth it to convert. Since we would not be able to add to
>the converted Roth IRAs in the future, we each have two small accounts that
>would not grow as quickly as each having one large account.
That doesn't make any sense. If the two small accounts were invested
in aggregate in the same things that single large account would be,
they would grow just as fas as the single large account.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Sat, 18 Apr 1998 20:26:45 -0400 (EDT)
From: Kathy Ferrell <kferrell@mosquitonet.com>
Subject: House Buying Question
In 1984 I bought a house for $58,000. I put a well in for $6000 shortly
after. In 1993, I quit claimed 1/2 of the house to my partner (who had
not paid for any of the previous expenses) and we got a loan for $82,500,
paid off the remaining $18,000 and built onto the residence. In 1994, when
we were done with construction, the house appraised for $115,500. At that
time, we got a conventional mortgage loan of $86,250 in both our names.
Two years later, we split up and I was released from the mortgage by the
bank while my ex took on the mortgage. We had settled on a price of
$125,000 for the home. I, in turn, owed my partner $7500.00 for a loan on
a rental property which we just took off the total owed me from the house
sale. After divvying up bills I came away with nothing except the
investment in the rental property.
When I did my taxes in previous years, I just started splitting all the
deductable stuff between us 50/50 and we both wrote off the house jointly.
The IRS questioned some interest one of my banks forgot to report and I
wrote them a letter explaining all this and they wrote back saying thanks
very much, no problem. My question is, should I have reported this as a
sale of home in 1993 when I first signed over 1/2 of it? And wouldn't
there technically be three sales since we had the construction loan and
then a conventional mortgage? I signed off on the final sale in September
of last year so I know the capital gains thing doesn't apply but I need to
get this all figured out. Any bright solutions or advice out there?
Kathy Ferrell
kferrell@mosquitonet.com
kferrell@northstar.k12.ak.us
------------------------------
Date: Sat, 18 Apr 1998 20:27:34 -0400 (EDT)
From: Paul and Ling <pl@iohk.com>
Subject: re: closed end funds
>Hello - Is there anyone out there who knows a place on the Web where I can
>freely get the discount (premium), on Closed-end funds? Thank you so
much. -
>Cajun Joe
Joe, one good place that I found is:
www.trustnet.co.uk/home.html
Paul in Hong Kong
------------------------------
Date: Sat, 18 Apr 1998 20:31:38 -0400 (EDT)
From: elsie@desertlinc.com
Subject: Continue Term Life Policy?
In 1983 when I was in my 30s and a single woman with 2 toddlers I took out
a $125,000 TIAA 5 year renewable term life insurance policy that included
an inflation rider. The premium was $194 at that time - one of the least
expensive policies avialable. I was eligible for it as a former university
employee.
Now I am in my early fifties, with children aged 19 and 17 - the older one
is no longer a dependent as he is in the military. In the meantime I have
inherited funds from a grandparent.
I have continued the TIAA policy. This year is one of those 5 year
adjustments in which the premium increases to $1,015. This premium will be
reduced by about $200 by a dividend credit. The insurance now amounts to
nearly $200,000 due to the affect over the years of the cost-of-living
rider.
The beneficiary of this insurance policy is the trustee or successor
trustee of my revocable trust with the proceeds to go to my children.
I expect to inherit a bequest from my mother and I have savings of my own.
I am not married. I am wondering whether I should continue this policy.
The insurance proceeds are not needed to raise my sons so I see as the only
reason to continue the policy would be to pay inheritence/estate taxes on
my death. The state in which I live does not impose state income nor
estate taxes.
I would appreciate thoughts from other folks on this list on my line of
reasoning. If indeed I should have insurance to pay for inheritence and
estate taxes, how do I figure the amount I need. Are there any other
considerations that I should attend to?
Thanks for the help.
Elsie
------------------------------
Date: Sat, 18 Apr 1998 20:32:34 -0400 (EDT)
From: Adam Londre <londre@cig.mot.com>
Subject: Enhanced Dollar Cost Averaging?
I once read of an "Enhanced" dollar cost averaging method for
adding funds to your stocks or mutual funds. It worked having a
type of "set point" and each investment period you would
increase the amt. invested if the price was down or decrease
the amt. when the price was up. You would then refigure your
set point. Does anyone recall the specific name or formula
for implementing this strategy??
------------------------------
Date: Sat, 18 Apr 1998 20:33:21 -0400 (EDT)
From: "Ken Meinken" <kmeinken@bigfoot.com>
Subject: Re: : Zero Coupons?
> From: marjorie.abrams@santafe.cc.fl.us
> Subject: Zero Coupons?
> I would like some advice about buying zero coupon
> bonds or strips. Is this an okay time to do that
> or should I await a rise in the interest rates? Should
> I ladder the dates eg...8 years, 9years, 10years?
> I have a diversified porfolio of 100% in equities. I am
> two years from retirement and I want to do asset
> allocation that protects some portion of my holdings.
> Thanks for your good advice. Marjorie
Marjorie,
Zero coupon bonds are usually purchased by someone who is making a
bet on the direction interest rates will go. If you think rates will
go down, then it might be a good time. If you think they will go up,
then it's a bad time. Most experts can't even predict the direction.
Why are you interested in zero coupon bonds? Are you aware that you
have to pay income tax on the theoretical dividend? (You have to pay
taxes each year on the dividends you will not receive until the bond
matures years from now, unless you hold the bond in an IRA type
account.) There are three bonds which are exceptions to the "pay the
tax each year": GMAC 2015 and 2012 issues and Sea River
Transportation (2012).
Ken
------------------------------
Date: Sat, 18 Apr 1998 20:34:01 -0400 (EDT)
From: dmak@tma-net.org
Subject: LT Cap Gains Rate?
After completing my taxes, it made me realize something that I wanted
to verify with others. One of my mutual funds over the past couple
years paid out big cap gains distributions, on which I had to pay 28%
tax. Of course, each time the fund pays a distribution and you
reinvest it, your cost basis increases. Well, in 1997 I sold the
fund and ended up with a taxable loss. The loss, however, is
considered long term, so do I really only get to deduct 20% of it,
rather than 28%, even after paying 28% tax before??
Thanks!
------------------------------
Date: Sat, 18 Apr 1998 20:36:37 -0400 (EDT)
From: dmak@tma-net.org
Subject: Re:Double Interest on Refi's
I have refinanced my mortgage manytimes and have always paid around 2
days of interest on both the old and new loan. The reason for this,
I was told, is that you begin paying interest on the new loan but
then a check is mailed to pay off your old loan. Since it takes a
couple days to mail the check, you're not off the hook on the old
loan until the check is received, hence double interest.
If anyone knows of a way to get around this, please let us know!
------------------------------
Date: Sat, 18 Apr 1998 20:40:00 -0400 (EDT)
From: Rick.Schafer@bdk.com
Subject: Tax Deduction For Employing My Son?
My son is 18 and we are looking at a huge bill coming up for school next
year -- actually for several years to come.
This summer I want to pay him $200/wk to do yard work part time on some
rental properties I own. He will then apply this money to his tuition, &
I will use the expense as a tax deduction. A $2000 expense will mean a
$560 tax savings for me. But I am wondering, will he be able to deduct
his expenses related to this work the way I do now, such as mileage
to/from the properties? He'll be using my vehicle, tools, and supplies.
Also, rather than having him use the money directly for school, can I
borrow it back from him at a fair interest rate, then pay his school bill
myself? This would increase my expenses and therefore reduce my taxes.
And it also gives him more money (the interest earned).
BTW, I got these ideas from http://biz.yahoo.com/taxes/famshift.html ...
check it out.
Thanks for any help,
Rick Schafer
------------------------------
Date: Sat, 18 Apr 1998 20:41:48 -0400 (EDT)
From: eric <eric_marcus@compuserve.com>
Subject: IRS quarterly estimates
My income varies from quarter to quarter. If I base my quarterly estimates
on my quarterly income, then how will the IRS know that I had quarterly
variations when I file my yearly return? Is there some specific form for
quarterly income figures?
Eric
------------------------------
Date: Sat, 18 Apr 1998 20:43:38 -0400 (EDT)
From: Kevin Jung <kjung@hawaii.edu>
Subject: Credit card interest calculations
Hello all,
I received a pre-approved offer for a First USA Platinum
Mastercard where the method of computing the balance is
the two-cycle average daily balance method. I realize
that given the choice, the average daily balance method
is better, but the interest rate on this card is a 4.9%
introductory, and 12.99 afterwards, which is better than
my other cards, which is why I'm considering switching.
My questions are:
1) How does the two-cycle method work?
2) How does this impact the finance charges on the balance
versus a higher interest rate?
Thanks,
Kevin
------------------------------
Date: Sat, 18 Apr 1998 20:45:17 -0400 (EDT)
From: eric <eric_marcus@compuserve.com>
Subject: Long distance ph service
I contacted Qwest. Charges are: 10c/min nights, 12c/min business hrs.
Intrastate: 6.5c/min nights, 9.5c/min bus. hrs.
Eric
------------------------------
End of persfin-digest V4 #148
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