From: "Anderson, Alfred I." Subject: Taxation Implications of Donated Items Date: 01 Nov 1999 07:49:15 -0600 Here is an interesting scenario, I have a rental house. The tenant abandoned the property leaving many personal articles behind. These articles would be difficult to sell (clothing, etc), so I elect to donate them to charity. I value the donation according to the "thrift-shop" rule. This will generate a charitable contribution for income tax purposes, effectively reducing my 1999 taxes. Question, how should this reduction in 1999 taxes be treated? - Should the reduction be applied as "rent" on the property and thus taxed? - Should I consider the abandoned property as a "gift" in which case no taxes would be owed? - Should I just take the deduction with no offsetting income? Interesting dilemma, no? Alfred Anderson Mayo Foundation (507)-284-9123 voice; pager 4-6014 Internet: Anderson@Mayo.edu - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: No More Estate Taxes? Date: 23 Nov 1999 09:41:54 -0700 This summer, Congress passed a tax relief bill that proposes to give Americans $792 billion of tax savings. This bill includes elimination of the estate tax. Before you start jumping up and down on the sofa, remember that a bill is not law and President Clinton has said he will veto the bill. And if you analyze how the votes tallied in Congress along party lines, you can see that Congress will not have the needed majority to overturn Clinton's veto. So don't plan on the estate tax disappearing. In fact, if we have a democratic administration after the next election, you might see estate taxes increase! For politicians, estate taxes are the easiest taxes to increase because they are collected from dead people! This is a voting block that doesn't complain much and certainly does not affect the outcome at the polls. Additionally, less than 4% of the US households have a net worth large enough to pay estate taxes (US Census Bureau, 1993). So there are very few people to raise objections to increases in the estate tax. The bottom line is this--if you have an estate over $650,000, then you need to be concerned about estate taxes. In fact, people should use as much of their $650,000 exemption as they can right now. Once you have used this tax break by removing assets from your estate, even if the estate tax is reduced later, Congress cannot come back and take away the assets you have legitimately segregated and protected from taxes. It's simple to remove assets from your estate. You can simply place them in a trust (not a living trust a unless it has an "A/B" provision). If you later need to use those assets, you could still have the flexibility to access those funds. But the beauty of using your exemption as early as possible is that you avoid $240,000 of taxes if Congress ever decides to remove the exemption altogether. As always, be well informed before taking any actions for your own situation... Best Regards, Jeff Salisbury - persfin admin/owner - ------------------------------------------------------------------------------- From: Jacqueline.D.Richardson@Hitchcock.ORG (Jacqueline D. Richardson) Subject: Re: Taxation Implications of Donated Items, Date: 23 Nov 1999 12:15:14 EST --- Alfred Anderson wrote: Question, how should this reduction in 1999 taxes be treated? - Should the reduction be applied as "rent" on the property and = thus taxed? - Should I consider the abandoned property as a "gift" in which = case no taxes would be owed? - Should I just take the deduction with no offsetting income? --- end of quote --- This probably varies by state, but in New Hampshire after 28 days = the left-behind property becomes the property of the landlord and = the landlord can dispose of it in any way they see fit. Therefore, = since it becomes your property and you donate it to charity I would = think you could write it off as a donation. I'm just a landlord, not an accountant or attorney. Jackie in VT/NH - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: Re: Retiring on the lottery Date: 23 Nov 1999 10:52:50 -0700 > Nancy Slator wrote: > > Stephen Brobeck, the consumer group's executive director, said > > banks and brokerage > > firms must take some of the blame for the fact that many Americans > > don't realize there are > > ways to invest profitably even small amounts of money, such as in > > savings bonds or mutual > > funds. > > Are there really ways for a 20 year old with $50 to get 9 percent > interest? Nancy, Absolutely there are ways for a 20 year old with $50 to get a 9% return! Maybe not guaranteed 9% interest... However, historically investments in equities have returned between 10-11% annually. Also, there are scads of mutual funds out there that will accept $50 per month -- particularly in an IRA. As an example, if a 20 year old invests $50 / month until they are age 65 and they average 11% return each year, they will have $248,673. If, as they get older and earn more, they increase their savings rate (even a little bit each year), they will do much, much better. There are two keys to winning this game: 1. Start saving and investing something now. Even if it seems too piddily to bother. It's the habit of saving that is important. 2. Increase your savings rate whenever you can until you are saving at least 10% of your income. Ususally this is the easiest to do when you get a salary increase associated with an annual raise, a promotion, or a change of jobs. Set a goal to increase your saving rate 1-5% each year until you've reached 10%. It is the habit of increasing your saving rate that is important. I'm not speaking some theoretical thing here. Rather, I speak from the personal experience of starting my savings in my 20's (I'm 36 now) and doing items #1 and #2. I still remember tracking down a mutual fund that would accept my meager $50/month. I felt a little intimidated at the time, but now over a decade later I'm amazed at the results... Regards, Jeff - ------------------------------------------------------------------------------- From: Rick.Schafer@bdk.com Subject: re: Taxation Implications of Donated Items Date: 23 Nov 1999 16:46:20 -0700 "Anderson, Alfred, " wrote... Here is an interesting scenario, I have a rental house. The tenant abandoned the property leaving many personal articles behind. These articles would be difficult to sell (clothing, etc), so I elect to donate them to charity. I value the donation Dear Alfred, You need to be careful. In our neck of the woods -- Massachusetts -- when a tenant abandons a rental unit and leaves property behind, the landlord is required to put the property in storage for 6 months at his own expense. If you do not do this, the poor abused tenant can sue you. At the end of that time if the tenant has not claimed it, you can sell it to pay the expenses. Otherwise, I like your idea. Rick Schafer - ------------------------------------------------------------------------------- From: "L. Chen" Subject: Re: Retiring on the lottery Date: 23 Nov 1999 23:40:53 -0500 (EST) > ............... > Are there really ways for a 20 year old with $50 to get 9 percent > interest? > ................... > I have a state retirement plan. I'm not going to have half a million > dollars when I retire, but I will have a pension. It's probably > statistically true that my best bet for having a half a million dollars in > the bank is the lottery -- and I don't even buy tickets. > > - -- Nancy Slator, neslator@amherst.edu Are you talking about $50/month or $50/week? 9% is the total return on equity investments, not interest on deposits. $50/month for 45 years @ 9% will give you $370,244 by the time you are 65. And I suspect you will be able to afford more than $50/month as your income grow over the years. So, $500K is not that difficult -- if you start early and keep at it. Aslo, don't forget to count your money in your 401 or IRA. That IS YOUR retirement money. It is the POWER OF COMPOUNDING. And compounding requires TIME IN THE MARKE (not timing the market) for it to work. [I borrowed the above expression from a broker's presentation.] TIAA-CREF recently started to offer some funds to the public with relative low expense ratio; and only $250 to open an account. TIAA and other fund companies will waive the minimum if you agree to an automatic investment arrangement. i.e. you agree to put it $25-50/month until the minimum is reached. Many people never start because they don't think they can reach an amount they have in mind. But you will never get there if you never start or keep procastinating. - ------------------------------------------------------------------------------- From: "L. Chen" Subject: Money flow statistics on stocks Date: 23 Nov 1999 23:42:50 -0500 (EST) Are there any low cost providers for the subject data? TIA Chen - ------------------------------------------------------------------------------- From: Nancy Slator Subject: Re: No More Estate Taxes? Date: 24 Nov 1999 18:50:41 -0500 (EST) > From: Jeff Salisbury > > The bottom line is this--if you have an estate over $650,000, then you > need to be concerned about estate taxes. I think estate taxes are the fairest tax of all. They don't take any money away from people who earned it and they don't take money away from people who need it. If my parents had a net worth over $650,000, I would have gone to boarding school and an Ivy League college, and then I could have been given the seed money to start my own business. I wouldn't be saddled with college loans and I'd probably be well on my way to having my house paid for. And I would have all these benefits without having lifted a finger -- just by the good luck of having been born into affluence. After I take all that to the bank, if the government gets between me and the fortune my parents worked hard for, I don't have much to complain about. -- Nancy Slator, neslator@amherst.edu - ------------------------------------------------------------------------------- From: "Gregory J. Bunger" <73174.377@compuserve.com> Subject: Charitable contributions Date: 24 Nov 1999 20:14:41 -0500 Re: How to handle gifting of abandoned items. Technically, you can only claim the lesser of the fair market value or yo= ur basis when gifting something to charity. So if the items were abandoned,= you have no basis (or cost) so you can't write any of the gift off as a charitable deduction. If you counted their value as rent received, included it on your shcedule= E, then you could deduct the amount you claimed as income, as long as it was less than the fair market value. In reality, the IRS is not going to question how you obtained the abandon= ed items and would only question the value you put down as a charitable deduction. (Unless you are giving away an unusually large amount of items= ). Hope this helps. Greg Bunger 73174.377@compuserve.com - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: Re: No More Estate Taxes? Date: 25 Nov 1999 06:52:08 -0700 Nancy Slator wrote: > > > From: Jeff Salisbury > > > > The bottom line is this--if you have an estate over $650,000, then you > > need to be concerned about estate taxes. > > I think estate taxes are the fairest tax of all. They don't take any > money away from people who earned it and they don't take money away from > people who need it. If my parents had a net worth over $650,000, I would > have gone to boarding school and an Ivy League college, and then I could > have been given the seed money to start my own business. I wouldn't be > saddled with college loans and I'd probably be well on my way to having my > house paid for. And I would have all these benefits without having lifted > a finger -- just by the good luck of having been born into affluence. > > After I take all that to the bank, if the government gets between me and > the fortune my parents worked hard for, I don't have much to complain > about. > > -- Nancy Slator, neslator@amherst.edu I have heard some people advocate doing away with all taxes except for a 100% estate tax. Personally I do not. However, consider these reasons for eliminating the current estate tax: 1. Estate and gift tax revenues raise less than 1% of each year's total federal tax revenues. 2. Estate and gift taxes are an obstacle to the continuity of family businesses and farms. These taxes force the sale of the business or farm upon the death of the first generation just so the 2nd generation can pay the estate tax. 3. Almost 90% of the estate tax returns are filed by estates of $2.5 million or less. 4. About 65 cents of each dollar of estate and gift tax collected is used for compliance and enforcement activities. Of these points, I find #2 and #4 to be the most compelling. Regards, Jeff - ------------------------------------------------------------------------------- From: jmetz@slonet.org (JMetz) Subject: Re: Theresa Overreacting Date: 25 Nov 1999 15:03:17 GMT Theresa and the Case of the Falling Child: I really think that Theresa overreacted to a common occurance at daycare. In my opinion, I believe the providers, the State, and the doctor acted appropriately. Is the child okay? If so, then what's the big deal? Getting cuts, falling, bruising, banging, hitting, etc. is typical behavioral occurances for 22 months old. I really hate to be so blunt, but Theresa's email really took the frosting off the cake for me. - ------------------------------------------------------------------------------- From: jmetz@slonet.org (JMetz) Subject: Re: Theresa Date: 25 Nov 1999 16:50:42 GMT Sorry for the previous post about Theresa. I hit the wrong button. Please forgive. Thanks. Entrepreneur, vivant, plumber, musician, chef, carpenter, electrician, gardener, psychologist, historian,teacher, provider, mechanic, nurse,chauffer,repairman, friend, enabler, masseur, babysitter, chemist, dishwasher, ameliorator, husband, father -just a few things I do. jmetz@slonet.org - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: Still Supporting Your Adult Children? Consider This Option Date: 29 Nov 1999 10:19:12 -0700 From time to time, I meet parents who are retired yet still supporting their children financially. While I don't think this is a good idea (read a copy of the Millionaire Next Door by Dr. Tom Stanley), I find it particularly sad when Mom and Dad are taking money out of their cash flow and decreasing their life style, just to help junior make his mortgage payment. Here's a better way to help the kids and not get pinched in the pocket book. Rather than taking the money out of our cash flow, you can turn a low yielding asset into income. For example, the average stock in the S&P 500 only pays a 1.25% dividend (Barrons, August 16, 1999). So many stocks will not produce a large current income. Or maybe you have raw land which pays you nothing. Those assets can be converted into extra current income that can be used to help junior. Worried about the capital gains? Here's how to beat that. A capital gains elimination trust (10% of the money must be left to charity, so this is often called a charitable reminder trust) allows you to sell the asset (stocks, real estate, etc), pay no capital gains tax, reinvest the proceeds for higher income, and receive that income. How much income can you receive? As long as the calculations indicate that 10% of the balance will remain for charity, the income and the original capital can all be paid out over time to Mom and Dad or to junior. Using this method, the parents don't need to cut into their regular cash flow in order to help their child. - ------------------------------------------------------------------------------- From: Rich Carreiro Subject: Capital gain netting rules Date: 30 Nov 1999 00:01:06 -0500 To try to boost (useful) traffic on the list, I thought I'd submit this brief post on how capital gains are netted, as (judging from posts on Usenet and elsewhere) the topic can sometimes be confusing. Short-term gains (losses) = gain (loss) from capital assets held one year or less (you count using trade execution dates, not trade settlement dates). Long-term gains (losses) = gain (loss) from capital assets held for more than one year. The netting rules: (a) Combine short-term (ST) gains with ST losses to get net ST gain (loss). (b) Combine long-term (LT) gains with LT losses to get net LT gain (loss). (c) Combine net LT gain (loss) with net ST gain (loss) to get net capital gain (loss). (d) If there is a net capital gain, the entire gain counts as adjusted gross income for all purposes (except for the ultimate calculation of tax). As for the tax on the gain, if there is both a net capital gain and a net LT capital gain, the smaller of the two is taxed at the special, favorable capital gain rates and the remainder (if any) of the net gain is taxed as ordinary income. If there is a net capital gain and no net LT capital gain, the entire capital gain is taxed as ordinary income. (e) If there is a net capital loss, the loss (though not more than $3000 if the loss is over $3000) reduces adjusted gross income for all purposes (including the ultimate calculation of tax). To the extent the loss is over $3000, the excess is carried over to the following year, with the ST and LT components of the loss being separately carried over. The Schedule D instructions will lead you to fill out a Capital Loss Carryover Worksheet which you retain for your records but do not file. -- Rich Carreiro rlcarr@animato.arlington.ma.us -