From: owner-persfin-digest@lists.xmission.com (persfin-digest) To: persfin-digest@lists.xmission.com Subject: persfin-digest V5 #84 Reply-To: persfin Sender: owner-persfin-digest@lists.xmission.com Errors-To: owner-persfin-digest@lists.xmission.com Precedence: bulk Content-Transfer-Encoding: quoted-printable X-No-Archive: yes persfin-digest Thursday, January 28 1999 Volume 05 : Number 084 In this issue of the Personal Finance Digest: Re: Education IRA anyone Schedule D and sale of home... Re: Schedule D Re: taxe deduction for renovations Re: S&P Depository Receipts Any info on group health insurance for small business? Re: Roth IRA Conversion Re: Free long distance time shares Tax Deductions on Renovations RE: Free long distance Error in prior submission Bid/Ask-type Questions SPDRs The messages posted to the Persfin-Digest are opinions and are not intended to substitute for qualified professional advice. Subscribers should seek the services of qualified professionals for such advice. The publisher, Internet provider, and Digest contributors cannot be held responsible for any loss incurred as a result of the application of any of the information provided here. To ask questions or provide answers, send your email to "persfin-digest@lists.xmission.com". Also, you can "reply" to the persfin-digest and your email tool should fill in the same address. However, if you "reply", be sure to edit the subject field in your email to reflect your topic. Copyright (c) 1998, Jeff Salisbury POSTED SUBSCRIPTION FEE: $20/year. Payment is optional. You will not be billed. The Digest is available to all subscribers, whether or not they pay. I do not discriminate either in favor of paying subscribers or against nonpaying subscribers. If you feel that the information presented here is worth the fee, and you feel comfortable paying it, send cash, check, or money order (U.S. funds), payable to "Jeff Salisbury", to: Jeff Salisbury 65 North 1300 East Logan, Utah 84321 Payment will be acknowledged by e-mail if you include an e-mail address. Subscribe: e-mail majordomo@xmission.com, text: subscribe persfin-digest Unsubscribe: e-mail majordomo@xmission.net, text: unsubscribe persfin-digest ---------------------------------------------------------------------- Date: Tue, 26 Jan 1999 17:52:52 -0500 From: greta.taglieri@iis.varian.com (Taglieri Greta) Subject: Re: Education IRA anyone >Date: Sun, 24 Jan 1999 05:08:17 GMT >From: dulnev@jhu.edu (Jason Dulnev) >Subject: Re: Education IRA anyone > >On Thu, 21 Jan 1999 08:29:43 -0700, you wrote: > >>Date: Tue, 19 Jan 1999 07:53:26 -0500 >>From: Somesh Rao >>Subject: Education IRA anyone ... >> >>Does anyone have an opinion on the Education IRA? Is it a good >>idea? Do I have till April 15th to put aside money for my son? >> >>Thanks >> >>Somesh > >It's certainly a great idea to put money in Educational IRA. While you >don't get any deductions for contributions, you also don't pay any >taxes on earnings. If you're going to invest for your son's education, >why not take advantage of the tax benefits? It's a pity it's only >$500. My son was just born so I should be able to get enough money for >less than one year tuition at a private school (considering growth of >the investment). That's not much, but every bit helps. >Unfortunately you missed the boat for 1998, the account had to be open >before the end of year. I got lucky: I saw an article on the topic in >the WSJ just five days before the end of year. Otherwise I'd miss the >boat too, just like millions of other people. > >Jason Dulnev >dulnev@jhu.edu Are you sure about this? I called around 12/29/98 and was told I had until April 15, 1999 to make a contribution to the Education IRA for 1998. I suppose I'll need to try calling again. $500 certainly is not a large amount to have for a cap. Have they looked at the cost of secondary education??? The major disadvantage that people have been pointing out is that the money will be considered as belonging to the child for purposes of financial aid/scholarships. I remember how frustrated I was when I was in high school and kept getting turned down for scholarships just because there was money in my name. I'd hate to do that to my children, but I will probably make at least one deposit into an Education IRA, even if I don't fund it every year. Greta Taglieri greta.taglieri@iis.varian.com - - ------------------------------ Date: Tue, 26 Jan 1999 16:02:25 -0800 From: Christy Rohrig Subject: Schedule D and sale of home... Hello all, Just wanted to give my input on two questions asked in the last digest (I received). The page 2 of Sch D is a calculation that assesses a 20% tax rate on your capital gains (or 10% if your in the 15% bracket). It can be confusing when doing it by hand, so read the lines carefully and as a check compair the tax you get: From tax table: taxable amount - long term capital gains + 20% of your long term capital gains. These numbers should match. I believe this formula gets complicated if your close to the border of 15% to 28% tax rate. On sale of the house where 2 apartments were added. You can completely deduct any gain on your personal residence up to $250k ($500k if married) given that you have owned it for 2 of the last 5 years and lived in it for 2 of the last 5 years. You sound like this is not a problem. On the sale of the 2 rental units, you will need to look at the basis, probably close to zero as you should have been depricating the cost for the improvements and recognize the gain on that portion of the property. One common method of splitting the value is by personal sq ft / total sq ft. You will have a taxable gain from the rental property. You may be able to do a 1031 exchange if you are interested in purchasing another income property. Talk to a tax advisor / 1031 specialist before selling this if you're interested in doing this. Regards, - -Christy - - ------------------------------ Date: Tue, 26 Jan 1999 23:41:02 -0500 From: Rich Carreiro Subject: Re: Schedule D >What is the purpose of the additional calculations on page 2 of Schedule D? >They seem to reduce your tax a few dollars compared to the tax table, but >what is it actually calculating? They are applying the 10% and 20% (and 25% and 28% for those few people with those types of gains) capital gain tax rates to long-term capital gains. Rich Carreiro rlcarr@animato.pn.com P5-100/RedHat Linux 4.2 - - ------------------------------ Date: Tue, 26 Jan 1999 23:40:06 -0500 From: Rich Carreiro Subject: Re: taxe deduction for renovations >I live in NC and would like to hear from anyone who is knowledgable on >the following situation. Is money spent for home renovations [$65K] tax >deductible? They aren't. >The renovations were performed in 1997 and 1998. If >deductible, is it 100% deductible and in what year? The check for >payment was written in 1998. It doesn't matter, because they aren't deductible. >Or, is a deduction only good when the >property is sold? Thanks for any help. David Renovations increase basis, thereby reducing gain on sale. Of course, with the new rules allowing the exclusion of up to $250,000 ($500,000 if MFJ), there probably won't be any tax on the gain and so home renovations don't really have any tax benefit for most people any more. Rich Carreiro rlcarr@animato.pn.com P5-100/RedHat Linux 4.2 - - ------------------------------ Date: Tue, 26 Jan 1999 23:38:04 -0500 From: Rich Carreiro Subject: Re: S&P Depository Receipts >I am interested holding some S&P Depository Receipts (SPDRS) to avoid >the possible issue of an Index Fund Manager faced with net redemptions >and having conduct a "fire sale" of portfolio shares and thus generating >huge capital gain distributions. Keep in mind that a these worries are fear and loathing spread by active managers and their advocates. For example, Vanguard has publically stated that they'd have to suffer redemptions of over 30% of assets before any cap gain distributions will be generated (in a declining market, the fund would sell its highest basis shares first, generating losses that would shield gains realized if the fund was forced to liquidate its low-basis stuff). >With that said, I am trying to better understand the mechanics of >pricing SPDRs. They seem similar to closed-end funds but they don't >trade with the expected premium or discount. That suggests they are not >priced on supply/demand but rather directly valued to the underlying >asset. They are exchange traded which suggests supply/demand pricing. >What am I missing? Read the prospectus. It states that SPDRs and a basket of SP500 stocks in the proper proportions are freely convertible with each other (well, for big institutions -- the creation/destruction units of SPDRs are sizeable). If a pricing gap ever begins to open, arbitrageurs will quickly slam the gap shut. Rich Carreiro rlcarr@animato.pn.com P5-100/RedHat Linux 4.2 - - ------------------------------ Date: Wed, 27 Jan 1999 00:05:13 -0500 From: John Leipold Subject: Any info on group health insurance for small business? Does anyone out there have any information on where to look or whom to call to get reasonable rates for small businesses on health insurance (fewer than 10 people)? Any help would be greatly appreciated. TIA John Leipold Newnan, GA - - ------------------------------ Date: Wed, 27 Jan 1999 01:32:47 -0500 From: "Steve Foulks" Subject: Re: Roth IRA Conversion >From: "Peter & Karen Diamond" >Subject: Roth IRA Conversion > >Hello, >I have been looking at Form 8606 for calculation of taxes on conversion to a >Roth IRA. >I have a Simple IRA and I had a traditional IRA funded entirely by post-tax >dollars that I converted to a Roth IRA. If when you say Simple IRA, you mean SIMPLE IRA, it is not possible to make post tax contributions to a SIMPLE. The form isn't meant to be used for SIMPLE IRA's, so any data you have on the scheduled related to a SIMPLE IRA shouldn't be there. >When I am done with the form, it leaves me with a basis for my traditional >IRA, but I don't understand what this is the basis of, since I no longer >have any traditional IRAs. Is it the basis for the Simple IRA? The whole >thing seems strange since I have to count my Simple as a traditional IRA >when the form never asked me to do that before. >Any information on this would be appreciated. >Thanks. I also did a conversion of my whole traditional IRA, and there is no basis on line 12 for the Traditional IRA. If you do have a number on that line, you have made an error. On line 17 is reported the amount that you must include in taxable income each of the 4 years, for doing the conversion. I think you need to carefully prepare the form. Forget the form for a moment. Conceptually you are taking the value of your IRA's at the time on conversion and subtracting any previously taxed amounts from this value (nondeductible contributions). You take this result and divide it by 4 (if you chose to spread the tax payments over 4 years) and include this amount on line 15b of 1040. I often find the forms to be very confusing. On average data only appears on 11% of the lines on tax forms. The rest of the lines are for those oddball quirky issues that very few taxpayers actually face. If you have some idea of the expected result, before you get started, you will know when you have completed it correctly. Steven M. Foulks, CPA, CFP, PhD        http://www-instruct.nmu.edu/business/sfoulks/ mailto:steve_foulks@up.bresnan.net - - ------------------------------ Date: Wed, 27 Jan 1999 03:40:26 -0500 (EST) From: "L. Chen" Subject: Re: Free long distance > I had heard of this company (www.broadpoint.com) which was offering 2 > minutes of free long distance for every commercial that you had listened > to. You dial up this 1-800 number and the number you want to call and > listent to these commercials. There was no limit on the number of > commercials you had listened to. So, if you listened to 20 of these > commercials, you would get 40 minutes free of long distance. Apparently, it > has been written up in some of the papers. My question is, what's the > catch? It sounds too good to be true. Has anybody used this service? I'd be > curious to hear about anybody's experience with this. Thanks! I recall reading that whatever minutes you accumulate is only good for the next call. i.e. if you listened to 20 commercials and get 40 minutes, you can make one free call only -- up to 40 minutes. If you only talk for 10 minutes, your lose the other 30 minutes. - - ------------------------------ Date: Wed, 27 Jan 1999 10:51:48 -0500 From: BOB FORD Subject: time shares >From: "Martin S. Turnauer" >My wife & I have been approached by the Marriott Corp about >Ford's Colony in Williamsburg, VA about a time share. I know >the problems with them, but >they have a deal now by not using you time share you can >convert to upgraded resorts and free airfare throughout the >world. Is anyone familiar with this new approach to time share? = >Marty >Martin S. Turnauer, Professor >Physical & Health Education >Box 6957 >Radford University >Radford, VA 24142 = Marty Time shares are using every possible way to get people to buy them. They are very profitable for the first seller. The important thing to remember is that time shares have very little value when you want to resell them. I bet you will find that there are all sorts of restrictions when you want to upgrade and get the free airfare. Once they have your money for the time share, the free flights may be all booked through 2020. BOB FORD BOB_FORD@COMPUSERVE.COM http://ourworld.compuserve.com/homepages/BOB_FORD/ VOICE 714-637-8877 FAX 714-637-2955 = Editor of the 57-56-55 CHEVY LIST and TURBOGLIDE REGISTRY = = - - ------------------------------ Date: Tue, 26 Jan 1999 20:04:32 EST From: DBONWEB@aol.com Subject: Tax Deductions on Renovations In a message dated 1/26/99 4:55:02 PM Central Standard Time, owner-persfin- digest@lists.xmission.com writes: << Date: 25 Jan 1999 09:42:12 -0700 From: David Bryan Subject: taxe deduction for renovations I live in NC and would like to hear from anyone who is knowledgable on the following situation. Is money spent for home renovations [$65K] tax deductible? >> David, I'm not a CPA, but I can tell you that it is NOT "deductible". All the expense does is increase your "basis" in the house so when you sell it, you would normally have less capital gain, however those rules have changed and there is NO capital gains tax on a "residence" provided you lived in the home for 3 of the last 5 years. Hope that helps. David Bolick, CPM - - ------------------------------ Date: Wed, 27 Jan 1999 13:22:12 -0500 From: "Porter, Jim R" Subject: RE: Free long distance carol.b.tan@us.pwcglobal.com wrote: > I had heard of this company (www.broadpoint.com) which was offering 2 > minutes of free long distance for every commercial that you had listened > to. You dial up this 1-800 number and the number you want to call and > listent to these commercials. There was no limit on the number of > commercials you had listened to. So, if you listened to 20 of these > commercials, you would get 40 minutes free of long distance. Apparently, > it > has been written up in some of the papers. My question is, what's the > catch? It sounds too good to be true. Has anybody used this service? I'd > be > curious to hear about anybody's experience with this. Thanks! > I have not used the service, but it was originally test marketed here in Pittsburgh for a few months so I've seen a fair amount of media coverage about the service. Supposedly the ads are pretty short, up to 15 seconds tops. No one has reported any "catch". The newspaper articles I've seen here say it's just what they claim it is. But you have to answer a number of questions so they can tailor the ads to your profile, and some people might not want to disclose all that information. I don't think you can "bank" the time for later use. You listen to the ads, and make your call right then. When your have only 30 seconds left, you hear a tone and wrap up your call. - - ------------------------------ Date: Thu, 28 Jan 1999 01:33:20 -0500 From: "Steve Foulks" Subject: Error in prior submission Jeff, I submitted the following answer yesterday and it is incorrect, so you should not publish it. I will send you a correction: - ---------------------------------------------------------------------------- - --------------------------------------------------- >From: "Peter & Karen Diamond" >Subject: Roth IRA Conversion > >Hello, >I have been looking at Form 8606 for calculation of taxes on conversion to a >Roth IRA. >I have a Simple IRA and I had a traditional IRA funded entirely by post-tax >dollars that I converted to a Roth IRA. If when you say Simple IRA, you mean SIMPLE IRA, it is not possible to make post tax contributions to a SIMPLE. The form isn't meant to be used for SIMPLE IRA's, so any data you have on the scheduled related to a SIMPLE IRA shouldn't be there. >When I am done with the form, it leaves me with a basis for my traditional >IRA, but I don't understand what this is the basis of, since I no longer >have any traditional IRAs. Is it the basis for the Simple IRA? The whole >thing seems strange since I have to count my Simple as a traditional IRA >when the form never asked me to do that before. >Any information on this would be appreciated. >Thanks. I also did a conversion of my whole traditional IRA, and there is no basis on line 12 for the Traditional IRA. If you do have a number on that line, you have made an error. On line 17 is reported the amount that you must include in taxable income each of the 4 years, for doing the conversion. I think you need to carefully prepare the form. Forget the form for a moment. Conceptually you are taking the value of your IRA's at the time on conversion and subtracting any previously taxed amounts from this value (nondeductible contributions). You take this result and divide it by 4 (if you chose to spread the tax payments over 4 years) and include this amount on line 15b of 1040. I often find the forms to be very confusing. On average data only appears on 11% of the lines on tax forms. The rest of the lines are for those oddball quirky issues that very few taxpayers actually face. If you have some idea of the expected result, before you get started, you will know when you have completed it correctly. Steven M. Foulks, CPA, CFP, PhD        http://www-instruct.nmu.edu/business/sfoulks/ mailto:steve_foulks@up.bresnan.net - - ------------------------------ Date: 28 Jan 99 15:58:09 EST From: Jacqueline.D.Richardson@Hitchcock.ORG (Jacqueline D. Richardson) Subject: Bid/Ask-type Questions Where can I get a crash course on the stock market? To narrow that down a bit <, I would like to learn some of the common terms and workings of the stock market such as the bid and ask price of a stock - basic things like that. Are there any web sites that could get me started? Thanks jackie - - ------------------------------ Date: Thu, 28 Jan 1999 20:29:48 -0500 From: Douglas Gerlach Subject: SPDRs >With that said, I am trying to better understand the mechanics of >pricing SPDRs. They seem similar to closed-end funds but they don't >trade with the expected premium or discount. That suggests they are not >priced on supply/demand but rather directly valued to the underlying >asset. They are exchange traded which suggests supply/demand pricing. SPDRs are Unit Investment Trusts that hold the S&P 500. As a trust, they never buy or sell securities, and each unit in the trust is priced at 1/10th of the value of the S&P 500 -- you're right, they're priced according to the underlying asset. While it's possible that elements of supply and demand could affect the price, the impact is negligible. The advantages of SPDRs over an S&P 500 index fund are: there are no capital gains distributed by SPDRs; the expense ratio charged by SPDRs is much less than the most efficient index fund, about 0.1845%; and you can buy and sell SPDRs on an intraday basis. The downside of SPDRs is that you have to pay commissions to buy them, but the economies of a discount broker and the lower expense ratio make this meaningless when you're investing any substantial amount. For more about SPDRs, check out this article on ArmchairMillionaire.com: http://www.armchairmillionaire.com/features/spiders_0416.html Invest-O-Rama!, http://www.investorama.com Investment Club Central, http://www.iclubcentral.com DRIP Central, http://www.dripcentral.com Investor's Web Guide, http://www.investorama.com/guide JUST PUBLISHED: Complete Idiot's Guide to Online Investing, http://www.investorama.com/cig - - ------------------------------ End of persfin-digest V5 #84 **************************** - To unsubscribe to persfin-digest, send an email to "majordomo@xmission.com" with "unsubscribe persfin-digest" in the body of the message. For information on digests or retrieving files and old messages send "help" to the same address. Do not use quotes in your message.