From: Ira Krakow Subject: Best strategy for using credit card for major purchase? Date: 13 Dec 1999 20:43:04 -0500 We are planning a major purchase ($5,000) and would like to use a credit card for it. We've had a lot (about one a day) of offers for low cost balance transfers and thought It might be a nice idea if we could exploit these offers to best effect. Anyone have any experience charging major purchase (like college tuition, which a number of colleges offer) on one or more credit cards and getting the maximum effect (rebates, frequent flier miles, paper towels at BJs, etc.) from it. Thought this would be an interesting topic. Ira __________________________________________________ Do You Yahoo!? Thousands of Stores. Millions of Products. All in one place. Yahoo! Shopping: http://shopping.yahoo.com - ------------------------------------------------------------------------------- From: esslady@ix.netcom.com Subject: Re: Best strategy for using credit card for major purchase? Date: 14 Dec 1999 10:17:25 -0500 (EST) On 12/13/99 20:43:04 [Ira Krakow] wrote: > > Anyone have any experience charging major purchase (like college tuition, which a number > of colleges offer) on one or more credit cards and getting the maximum effect (rebates, > frequent flier miles, paper towels at BJs, etc.) from it. ------------ It had been my plan to negotiate to purchase my car using a mileage plus card. Part of the "deal" would be that I could make two payments (my credit card will not award more than 10K frequent flyer miles per period), so my entire car would be charged to my credit card (which I would pay off at the end of the month). A friend had done this, and it was the driving force behind my getting a mileage plus credit card in the first place. Apparently, the credit card and car people have caught on to this! The people from whom I ended up buying my car (car dealer) told me that the credit card company raises the discount when the car dealer permits more than $X to be charged (my recollection is that it was $3K). The place where I was offered the second best deal on the car purchase (a car broker) limited me to a little more (maybe as much as $5K?). I was dissapointed, but at least got a good price on the car (I paid invoice). ;-) elaine - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: Trouble with the list software... Date: 15 Dec 1999 17:11:11 -0700 Hello everyone, I belive that we are having some problems with the list software. I am about to resend a series of posts to the group that I believe the digest subscribers have never received. These article were in the following digest versions: Tuesday, November 30 1999 Volume 05 : Number 109 Wednesday, December 15 1999 Volume 05 : Number 110 If you are a digest subscriber and you have received these digests or articles, please drop me an email at mailto:jeff.salisbury@xmission.com Best Regards, Jeff - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: Still Supporting Your Adult Children? Consider This Option Date: 15 Dec 1999 17:09:59 -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: 15 Dec 1999 17:10:17 -0700 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 - ------------------------------------------------------------------------------- From: Ira Krakow Subject: Best strategy for using credit card for major purchase? Date: 15 Dec 1999 17:10:36 -0700 We are planning a major purchase ($5,000) and would like to use a credit card for it. We've had a lot (about one a day) of offers for low cost balance transfers and thought It might be a nice idea if we could exploit these offers to best effect. Anyone have any experience charging major purchase (like college tuition, which a number of colleges offer) on one or more credit cards and getting the maximum effect (rebates, frequent flier miles, paper towels at BJs, etc.) from it. Thought this would be an interesting topic. Ira - ------------------------------------------------------------------------------- From: esslady@ix.netcom.com Subject: Re: Best strategy for using credit card for major purchase? Date: 17 Dec 1999 08:13:20 -0700 On 12/13/99 20:43:04 [Ira Krakow] wrote: > > Anyone have any experience charging major purchase (like college tuition, which a number > of colleges offer) on one or more credit cards and getting the maximum effect (rebates, > frequent flier miles, paper towels at BJs, etc.) from it. ====================================================================== It had been my plan to negotiate to purchase my car using a mileage plus card. Part of the "deal" would be that I could make two payments (my credit card will not award more than 10K frequent flyer miles per period), so my entire car would be charged to my credit card (which I would pay off at the end of the month). A friend had done this, and it was the driving force behind my getting a mileage plus credit card in the first place. Apparently, the credit card and car people have caught on to this! The people from whom I ended up buying my car (car dealer) told me that the credit card company raises the discount when the car dealer permits more than $X to be charged (my recollection is that it was $3K). The place where I was offered the second best deal on the car purchase (a car broker) limited me to a little more (maybe as much as $5K?). I was dissapointed, but at least got a good price on the car (I paid invoice). ;-) elaine - ------------------------------------------------------------------------------- From: juanb@vnet.ibm.com Subject: Sell Mutual funds before or after distributions? Date: 17 Dec 1999 10:22:55 EST I've been invested in a mutual fund for about 3 years, making monthly contributions. The performance has been average at best so I decided to liquidate the account and invest in something else. They were scheduled to make distributions on 12/16, so I sold everything on 12/15, since they were going to make significant dividend and short-term capital gains distributions. When I called the company, they were very emphatic on stating that I would not receive the coming distributions, almost making it sound like I was going to lose out on a great windfall. My logic is that since I've held the fund for over a year, all my gains will be long-term (20%) and since when distributions are made, the NAV falls by that amount, the money I would have received after the sale may have been less, with the remainder being made up of the div/st-g, with all the money taxed accordingly. Should I have sold after the date, or is this a wash either way? Thanks, Juan - ------------------------------------------------------------------------------- From: "Steve R. Rasmussen" Subject: Forgot Date: 17 Dec 1999 09:24:57 -0800 Jeff, I hit the send switch before I remembered to tell you that Persfin digests 109 and 110 did not come to me. The last Persfin digest I received before getting number 111 this morning is 108. Steve - ------------------------------------------------------------------------------- From: Brian Gordon Subject: "Hiding" capital gains Date: 17 Dec 1999 11:55:53 -0800 (PST) I have a "happiness problem" -- humongous gains from ESO stock after IPO -- but I can't stand the idea of giving up 40% of it to taxes. A financial advisor has just suggested I bury it in Oil Exploration/Drilling, with an outfit that has a good track record, so that almost all of it it a tax deduction which is never recovered. Too good to be true? More complex than I understand? +-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+ | Brian Gordon -->briang@netcom.com<-- Brian_Gordon@whitelight.com | +-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+ - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: Re: "Hiding" capital gains Date: 17 Dec 1999 15:43:30 -0700 Brian Gordon wrote: > > I have a "happiness problem" -- humongous gains from ESO stock after IPO -- but > I can't stand the idea of giving up 40% of it to taxes. A financial advisor > has just suggested I bury it in Oil Exploration/Drilling, with an outfit that > has a good track record, so that almost all of it it a tax deduction which is > never recovered. Too good to be true? More complex than I understand? > Brian, It isn't clear to me what your advisor is recommending -- Is he suggesting you sell some other holding you have that is a loser and offseting your gain with the loss? Or, is he suggesting that you buy a limited partnership so you can offset the gain you have with the operating losses of the limited partnership? Jeff - ------------------------------------------------------------------------------- From: Ira Krakow Subject: Anyone pay attention to dividends or P/E ratios? Date: 18 Dec 1999 09:17:01 -0500 I was wondering if any persfiners take dividends into account when = considering investments. I know it's hard to take a 5% dividend = seriously in the era of VA Linux (IPO price of $11, first bid $299) or = Red Hat, but perhaps for someone nearing retirement a regular check that = is backed by a company with real earnings might make one sleep a bit = better at night. =20 Also, what about companies with solid earnings and a brand name. = Companies like Coca Cola and Gillette have hit some bumps recently but = neither of them will go away soon, unless we all stop drinking Coke and = shaving. What about *current* earnings? Ira __________________________________________________ Do You Yahoo!? Thousands of Stores. Millions of Products. All in one place. Yahoo! Shopping: http://shopping.yahoo.com - ------------------------------------------------------------------------------- From: BOB FORD Subject: CREDIT CARS AND FREQUENT FLYER MILES. Date: 18 Dec 1999 12:08:41 -0500 I have also run into problems using credit cards on very large purchases. I try to use my credit card on every purchase no matter how small or large. These purchases soon add up to a lot for frequent flyer miles. BOB FORD - ------------------------------------------------------------------------------- From: BOB FORD Subject: AVOID ESTATE TAXES Date: 18 Dec 1999 12:08:43 -0500 I recently read an article on avoiding estate taxes. It suggested creating a note (IOU) to your children as a way to avoid estate taxes. For example if your estate was $1,000,000 it said that you could create a note to your children that was payable on your death. If you had two children the note could be for $500,000. It is claimed that would make the value of your estate Zero. Anyone know if this will work? BOB FORD BOB_FORD@COMPUSREVE.COM - ------------------------------------------------------------------------------- From: Brian Gordon Subject: Hiding capital gains Date: 18 Dec 1999 09:59:49 -0800 (PST) > Date: Fri, 17 Dec 1999 15:43:30 -0700 > From: Jeff Salisbury > Subject: Re: "Hiding" capital gains > > Brian Gordon wrote: > > > > I have a "happiness problem" -- humongous gains from ESO stock after IPO -- but > > I can't stand the idea of giving up 40% of it to taxes. A financial advisor > > has just suggested I bury it in Oil Exploration/Drilling, with an outfit that > > has a good track record, so that almost all of it it a tax deduction which is > > never recovered. Too good to be true? More complex than I understand? > > > > Brian, > > It isn't clear to me what your advisor is recommending -- Is he > suggesting you sell some other holding you have that is a loser and > offseting your gain with the loss? Or, is he suggesting that you buy a > limited partnership so you can offset the gain you have with the > operating losses of the limited partnership? > > Jeff The latter -- make the oil drilling investment with profit and have that almost completely offset by depreciation and expenses in the first year. - ------------------------------------------------------------------------------- From: Rich Carreiro Subject: Re: "Hiding" capital gains Date: 18 Dec 1999 16:09:01 -0500 > >I have a "happiness problem" -- humongous gains from ESO stock after IPO -- but >I can't stand the idea of giving up 40% of it to taxes. A financial advisor >has just suggested I bury it in Oil Exploration/Drilling, with an outfit that >has a good track record, so that almost all of it it a tax deduction which is >never recovered. Too good to be true? More complex than I understand? You really need to be careful with these. First, with the change in tax laws in 1986 and the institution of the "passive income" and "passive loss" rules, much of the utility of those types of tax shelters disappeared. Second, many of these things are just out-and-out scams. Third, not only are some of them scams, but some of them are so-called "abusive tax shelters" and may well get you in trouble with the IRS if you get involved with them. Fourth, they can be very complicated. My recommendations are, FWIW: * Demand that your advisor disclose what sort of commissions that you would be paying him to get into this thing and also demand that he tell you what (if any) remuneration he is receiving from the tax shelter outfit. * Consult with a tax professional (preferably an EA or a CPA who primarily does taxes (as opposed to one who primarily does bookkeeping/accounting) and have them do some research on the specific tax shelter outfit your advisor is trying to sell you. Rich Carreiro rlcarr@animato.arlington.ma.us - ------------------------------------------------------------------------------- From: Rich Carreiro Subject: Re: Sell Mutual funds before or after distributions? Date: 18 Dec 1999 16:11:29 -0500 >I've been invested in a mutual fund for about 3 years, making monthly >contributions. The performance has been average at best so I decided >to liquidate the account and invest in something else. They were >scheduled to make distributions on 12/16, so I sold everything on >12/15, since they were going to make significant dividend and short-term >capital gains distributions. When I called the company, they were >very emphatic on stating that I would not receive the coming >distributions, almost making it sound like I was going to lose out on >a great windfall. You did the right thing, IMHO. Remember that the distribution amount was built into the NAV of the fund. Since you were holding the shares long-term, you got long-term rates on it. If you had sold after the distribution, the NAV would have fallen by the amount of the distribution and you would have received some of that chunk of NAV in the form of dividends (and the rest in long-term gains). In other words, selling after the distribution would have turned some of your long-term gains into ordinary income. So your logic was fine and you were right on the ball. Rich Carreiro rlcarr@animato.arlington.ma.us - ------------------------------------------------------------------------------- From: Brian Gordon Subject: Re: "Hiding" capital gains Date: 18 Dec 1999 09:44:26 -0800 (PST) > Date: Fri, 17 Dec 1999 15:43:30 -0700 > From: Jeff Salisbury > Subject: Re: "Hiding" capital gains > > Brian Gordon wrote: > > > > I have a "happiness problem" -- humongous gains from ESO stock after IPO -- but > > I can't stand the idea of giving up 40% of it to taxes. A financial advisor > > has just suggested I bury it in Oil Exploration/Drilling, with an outfit that > > has a good track record, so that almost all of it it a tax deduction which is > > never recovered. Too good to be true? More complex than I understand? > > > > Brian, > > It isn't clear to me what your advisor is recommending -- Is he > suggesting you sell some other holding you have that is a loser and > offseting your gain with the loss? Or, is he suggesting that you buy a > limited partnership so you can offset the gain you have with the > operating losses of the limited partnership? > > Jeff The latter -- make the oil drilling investment with profit and have that almost completely offset by depreciation and expenses in the first year. - ------------------------------------------------------------------------------- From: Ira Krakow Subject: Credit Card Offer Date: 19 Dec 1999 10:19:43 -0500 I received a credit card offer for a Platinum VISA card from Capital One = Bank in Richmond Virginia. The offer is "exclusively" for those people = who celebrate their Polish heritage. (I have no idea how these people = figured out that I was in this category.) Anyway, the offer sound intriguing because they would not charge any = interest until July, 2000 on new purchases, and then go to 9.9% after = that. Now, I normally pay my entire credit card balance in full at the = end of each month because I'm allergic to credit card debt. The offer = of no interest also appeared to apply to balance transfers. So I was = thinking that maybe I should generate a balance (like maybe writing a = bunch of checks against another credit card that I have where the = company always sends me blank checks), depositing it into a money market = account, and then transferring all of this to this Polish Heritage Visa = Account. Anyone see any problems with this strategy? Or do you think it's too = much hassle? Ira __________________________________________________ Do You Yahoo!? Thousands of Stores. Millions of Products. All in one place. Yahoo! Shopping: http://shopping.yahoo.com - ------------------------------------------------------------------------------- From: "Peter Diamond" Subject: Dividends and P/E Ratios Date: 19 Dec 1999 10:14:17 -0500 Ira, (I will preface this by saying, most of my individual stock investments are tech-based. Also, I am young and these are long-term investments.) Personally, I do not pay much attention to dividends, P/E and other fundamentals. The individual stocks I buy are of companies I believe in. Companies in industries I understand that I think have a good long-term growth potential. I have looked at some more "traditional" companies, and I do think you must consider fundamentals, but there are some questions you should ask of any company. Are sales and profits increasing? How does the company compare to its peers? You ignore these questions at your own risk. For me, the bottom line is, will this company be worth more in the future? The answer needs to be yes, either because the company has a solid track record of growth, or because they are in a growing industry where the potential for growth is high, even if the stock appears fundamentally overpriced right now. Peter - ------------------------------------------------------------------------------- From: "Peter Diamond" Subject: Sale of Mututal Funds Date: 19 Dec 1999 10:17:10 -0500 Juan, You did the right thing. If you sold right after the distribution, you would have received the same amount of money since you would just be selling more shares at a lower price. The big difference is that now all of your gain is a long term capital gain taxed at 20%. If you sold after the distribution, your monetary gain would be the same, but some of it would become a short term gain taxed at your ordinary tax rate. This situation is the inverse of "don't buy the dividend". You don't want to buy a fund right before the distribution because you will not get any monetary gain, but you will get a tax bill for something you only owned for a few days. Peter - ------------------------------------------------------------------------------- From: BOB FORD Subject: HIDE CAPITAL GAINS Date: 19 Dec 1999 10:56:35 -0500 I am not a tax pro but I don't think it is possible to hide any Capital Gains. It is my understanding that if you sell a capital asset at a profit, it must be reported on your income tax and there are no exceptions. You must also report capital losses. = Someone let me know if that is incorrect. BOB FORD BOB_FORD@COMPUSERVE.COM = - ------------------------------------------------------------------------------- From: Jerry Derfler Subject: Checking out online travel agents Date: 19 Dec 1999 20:04:32 -0600 My wife and I plan to travel to Great Britain next September and have found several on line ticketing agents that can save us several hundred dollars per ticket. Besides the obvious questions listed below, are there other ways to protect ourselves before we order these tickets? How long in business? Who are the officers of company? Street address of business? Date time hours of business where personal contact can be made? What travel associations do they belong to and for how long? Non 800 telephone numbers? Who governs there fair practices - city, county, state attorney or whom? Tax payer ID number? Thanks in advance, Jerry Derfler Topeka, KS - ------------------------------------------------------------------------------- From: Rich Carreiro Subject: Re: AVOID ESTATE TAXES Date: 19 Dec 1999 21:31:20 -0500 >I recently read an article on avoiding >estate taxes. It suggested creating a >note (IOU) to your children as a way >to avoid estate taxes. For example >if your estate was $1,000,000 it said >that you could create a note to your >children that was payable on your >death. If you had two children the >note could be for $500,000. It is claimed >that would make the value of your >estate Zero. I can't see how it *can* work. Where's the liability? What does the person actually owe? How is saying "I owe you $1,000,000 when I die" differ from leaving them $1,000,000 in your will? And even if creating such an IOU is considered some sort of liability (in the accounting sense) then giving it to your children without them giving you something in return means you have given a gift of a future interest and that'll be subject to the gift tax rules. You are certainly allowed to reduce your assets by your debts when figuring the size of your estate. But where's the debt here? And then there's the simplest IMHO :-) test of all -- if it were that easy to get out of paying estate tax: (1) You'd be reading about it in every popular finance media known to man. (2) There would be far fewer estate tax specialists out there. Since neither of those are true, I conclude it doesn't work. Rich Carreiro rlcarr@animato.arlington.ma.us - ------------------------------------------------------------------------------- From: "Harold R. Justice" Subject: Estate Taxes Date: 19 Dec 1999 20:41:56 -0600 Bob, This sounds like a scam to me. The best way to save on estate taxes is to consult with a professional estate planner and set up the proper trusts and a correctly written will. For the note to be valid, your children would have to give you something of equal value, perhaps taking in the present value of the amount you will leave them. Not many children could afford to do this. Harold Justice > Date: Sat, 18 Dec 1999 12:08:43 -0500 > From: BOB FORD > Subject: AVOID ESTATE TAXES > > I recently read an article on avoiding > estate taxes. It suggested creating a > note (IOU) to your children as a way > to avoid estate taxes. For example > if your estate was $1,000,000 it said > that you could create a note to your > children that was payable on your > death. If you had two children the > note could be for $500,000. It is claimed > that would make the value of your > estate Zero. > > Anyone know if this will work? > > BOB FORD > BOB_FORD@COMPUSREVE.COM > - ------------------------------------------------------------------------------- From: "Lester M. Levy MD" Subject: Re: Anyone pay attention to dividends or P/E ratios? Date: 20 Dec 1999 00:00:00 -0500 IRA: After having looked at various entities for many years, I have concluded that much of the conventional wisdom offered to the average Joe is often worthless. Often a conservative portfolio is represented as consisting of a mixture of bonds, income producing stocks and some fraction of growth stocks, the percentage declining with increasing age, and lack of sophistication. The first thing to note is that in recent decades, bonds and stocks have tended to move up and down together (not opposite) and often in response to interest rates. With rising interest rates, you can lose as much money with a bond as with a stock, but the historic rate of return of stocks has been 8-9 percent, while bonds have yielded perhaps 4-5 percent. An income producing stock (read high dividends) pays out about the same as bonds, and with a large amount of its earnings paid out tends not to grow in value as much as a stock which pays little or nothing in dividends. Dividends and bond income (except tax-exempt income) are almost always ordinary income, and it is not difficult to reach a marginal tax rate in the 30's percent, even for an average guy or gal. With a 31 % tax rate, a 5 percent yield leaves only 3.5 percent, which barely (if at all) compensates for the loss of principle due to inflation. On the other hand, investing in growth stocks (or the S&P index) with little or no dividends, can easily produce needed income by selling off those shares which have been held for more than a year, and hence will be taxed at a maximum of 20 percent. Thus 8 percent yield after 20% tax leaves 6.4 percent well above the average inflation rate. Thus investing in bonds or income stocks will often not produce useful income... can that be considered safe? -- -Lester M. Levy, MD llevy@hoflink.com - ------------------------------------------------------------------------------- From: "L. Chen" Subject: Re: "Hiding" capital gains Date: 20 Dec 1999 02:35:42 -0500 (EST) > Date: Fri, 17 Dec 1999 11:55:53 -0800 (PST) > From: Brian Gordon > Subject: "Hiding" capital gains > > I have a "happiness problem" -- humongous gains from ESO stock after IPO -- > but I can't stand the idea of giving up 40% of it to taxes. A financial > advisor has just suggested I bury it in Oil Exploration/Drilling, with an > outfit that has a good track record, so that almost all of it it a tax > deduction which is never recovered. Too good to be true? More complex than > I understand? Do NOT make any investment JUST for tax reasons. And don't invest in any thing that you don't understand. Oil exploration/drilling (esp. exploratory drilling) are high risk investments. You can save 40% in capital gains taxes and lose more than 100% of your investment -- because (if you read the prospectus/memorandum) in order to get the size of deductions represented by the sponsor, you have to be liable for your share of the leverage used in the project. So you could end up worse off than paying the 40% tax! Chen - ------------------------------------------------------------------------------- From: "L. Chen" Subject: Re: AVOID ESTATE TAXES Date: 20 Dec 1999 02:46:19 -0500 (EST) > Date: Sat, 18 Dec 1999 12:08:43 -0500 > From: BOB FORD > Subject: AVOID ESTATE TAXES > > I recently read an article on avoiding > estate taxes. It suggested creating a > note (IOU) to your children as a way > to avoid estate taxes. For example > if your estate was $1,000,000 it said > that you could create a note to your > children that was payable on your > death. If you had two children the > note could be for $500,000. It is claimed > that would make the value of your > estate Zero. I don't think you can simply give your children an IOU in return for nothing. To be a valid IOU, you need to receive something of equal value. Otherwise, one can argue that you give away an asset worth $1 million and incur a gift tax. Also, if there is no interest on the IOU, the value of the interest would be considered a gift -- esp. whether it is between relatives. I am not a tax professional; and the above may not be precisely correct. But you get the idea. Chen - ------------------------------------------------------------------------------- From: "L. Chen" Subject: Re: Credit Card Offer Date: 20 Dec 1999 02:55:12 -0500 (EST) > Date: Sun, 19 Dec 1999 10:19:43 -0500 > From: Ira Krakow > Subject: Credit Card Offer > > ........................ > Anyway, the offer sound intriguing because they would not charge any = > interest until July, 2000 on new purchases, and then go to 9.9% after = > that. Now, I normally pay my entire credit card balance in full at the = > end of each month because I'm allergic to credit card debt. The offer = > of no interest also appeared to apply to balance transfers. So I was = > thinking that maybe I should generate a balance (like maybe writing a = > bunch of checks against another credit card that I have where the = > company always sends me blank checks), depositing it into a money market = > account, and then transferring all of this to this Polish Heritage Visa = > Account. > > Anyone see any problems with this strategy? Or do you think it's too = > much hassle? With respect to purchases, it might work. You have to read all the find prints. With respect to cash advances (writing checks is generally considered as cash advances): Is there a transaction fee? Almost always, there is a transaction charge of 1-3% of the cash advance. So it is not totally free. Whether it is worth the hassel depends on the credit limit on that new card and the transaction charge. Chen - ------------------------------------------------------------------------------- From: Ira Krakow Subject: RE: Dividends and P/E Ratios Date: 21 Dec 1999 07:25:16 -0500 Peter, Thanks for the great advice. Ira -----Original Message----- Sent: Sunday, December 19, 1999 10:14 AM Ira, (I will preface this by saying, most of my individual stock investments are tech-based. Also, I am young and these are long-term investments.) Personally, I do not pay much attention to dividends, P/E and other fundamentals. The individual stocks I buy are of companies I believe in. Companies in industries I understand that I think have a good long-term growth potential. I have looked at some more "traditional" companies, and I do think you must consider fundamentals, but there are some questions you should ask of any company. Are sales and profits increasing? How does the company compare to its peers? You ignore these questions at your own risk. For me, the bottom line is, will this company be worth more in the future? The answer needs to be yes, either because the company has a solid track record of growth, or because they are in a growing industry where the potential for growth is high, even if the stock appears fundamentally overpriced right now. Peter - - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: A virulant computer email virus... Date: 24 Dec 1999 06:00:25 -0700 Greetings, I have just been notified by a group of list owners that there is a particularly virulent email virus propagating through the Internet. The details of this virus can be found at Symantec's web-site: http://www.symantec.com/avcenter/venc/data/worm.newapt.html There is little possibility that this virus could be spread through the Persfin discussion group since our list software is configured to reject all non ascii-text email. However, you should be cautious of all other email you may be receiving -- particularly email with attachments. I would urge you to update your virus software. If you do not own anti-virus software, perhaps it is time to take the plunge... Best Regards, Jeff Salisbury - ------------------------------------------------------------------------------- From: Ken Stone Subject: Mutual Fund Load Shares Date: 24 Dec 1999 09:44:10 -0500 I am considering purchasing a fund for my childrens' college accounts (5 and 7 yrs old). It is a loaded mutual fund (Goldman Sachs Internet Tollkeeper) and there are 3 types of shares: A, B and C. I believe that these are standard designations, rather than anything peculiar to this fund. Could someone please explain what circumstances it is best to buy which shares? Thanks, Ken Stone - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: Re: Mutual Fund Load Shares, College Savings Date: 24 Dec 1999 09:10:00 -0700 Ken Stone wrote: > > I am considering purchasing a fund for my childrens' college accounts (5 > and 7 yrs old). It is a loaded mutual fund (Goldman Sachs Internet > Tollkeeper) and there are 3 types of shares: A, B and C. I believe that > these are standard designations, rather than anything peculiar to this fund. > > Could someone please explain what circumstances it is best to buy which shares? > > Thanks, > Ken Stone > Ken, First, you should only be in a loaded fund if an advisor is, well, giving you advice. If you are getting advice you feel is valuable, then it is proper for you to pay for it. However, if you are doing the leg-work yourself, go for a no-load fund. Having said that, here is the answer to your question: A-Share funds: You pay the entire commission up-front. Usually it is 4-6%. So, assuming the load is 5% and you write a check for $100, only $95 actually goes into your account. The other $5 is retained by your advisor for his compensation. Choose this option if you just want to get the commission out of the way. B-Share funds: You still pay the entire commission, but it is taken out of the fund over a period of years (usually 5-7 years). This effectively lowers the fund's return relative to A-shares for the 5-7 year period. If take the $ out before the 5-7 years are up, you will pay a pro-rated portion of the commission. Basically, you are going to pay the roughly the same in commissions with A and B shares. The question is whether it is deferred or not. C-Share funds: You pay 1% annually for as long as your money is in the fund. You don't actually write a check, but it is deducted as an annual expense of the fund. This option pays less up-front, but more in the long-run. Choose this option if you expect to want or need the services of your advisor over a long period of time -- say greater than 7-10 years. Or choose this if you think you may move your money from Goldman Sachs before 7-10 years. Having said this, there are two concepts that may be even more important than whether you choose A, B, or C shares: 1. What is the long-term performance of the fund? And closely related, does the fund have a low expense ratio and low turn-over rate (relative to its peers) after the loads and commissions have been paid? Most funds that lead their peers have these characteristics. In the long term, performance, fund expenses, and fund turnover have far greater impact than the commissions. 2. Perhaps the most important of all is that you should be saving for your childrens' college in a tax-favored account such as an IRA or Roth IRA. Time after time, I've seen many people saving for college in taxable accounts when there is a better alternative. Year after year they have their returns damaged by a tax bill. Over 10-15 years the damage is significant. With changes in the tax laws of the past few years, it makes tremendous sense to be saving for your children's college in IRAs. Furthermore, there are often circumstances where you can roll your employer retirement plan into an IRA and have access to that money for college too. Overall, this is a very powerful technique than many people fail to utilize! If you have maxed out your retirement plans and still want to be saving more for future college, there are other avenues you can pursue. Perhaps we could talk about these alternatives in the future. Best Regards, Jeff - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: Re: AVOID ESTATE TAXES Date: 24 Dec 1999 11:05:47 -0700 BOB FORD wrote: > > I recently read an article on avoiding > estate taxes. It suggested creating a > note (IOU) to your children as a way > to avoid estate taxes. For example > if your estate was $1,000,000 it said > that you could create a note to your > children that was payable on your > death. If you had two children the > note could be for $500,000. It is claimed > that would make the value of your > estate Zero. > > Anyone know if this will work? > > BOB FORD > BOB_FORD@COMPUSREVE.COM Bob, First let me say I concur with the comments that Rich and Chen wrote. There has to be some valid contractual consideration for both parties for anything transfer like this to work. However, there is a tried and true technique vaguely similar in concept to what you describe. It is called a "private annuity". It works something like this. If you have some asset or money you wish to go to your heirs, you can in effect sell it to your heirs in return for an annuity income stream. This income stream must be based on your expected life-time and an IRS designated interest rate. Your heirs are then contractually obligated to produce enough income (usually from the asset they received) to pay you the annuity income for life. Here's where it shines for estate planning purposes. 1. Suppose a month after you setup this private annuity you were hit by a truck and killed. Your heirs own the asset free and clear of all estate taxes even though the total of the annuity payments made to you may not even come close to the value of the asset. The contract is for life, not for a specific total of the annuity payments. 2. Suppose you die decades later and the asset you transferred has increased in value many times. Even though this asset has increased in value by ten times it is already out of your estate and will not be hit by estate taxes. So, to summarize, this technique works best when: 1. You have an asset you want to transfer to your heirs. 2. You are willing to give up the asset in return for an life-time annuity income stream. 3. The asset is capable of producing enough income to fulfill the annuity income stream obligation. This requirement is usually easier to fulfill than you may think. 4. As a bonus, the private annuity can be used to defer capital gains taxes. I'll talk about this in reply to your posting about capital gains. Jeff - ------------------------------------------------------------------------------- From: "Allen Meyer" Subject: Money Mastery question Date: 24 Dec 1999 09:29:44 -0700 Hello all, Has anyone out there heard of Money Mastery? If so, I would appreciate any insights you may have. They sound like a reputable company, but my concern is the price. It seems strange that they encourage people to get out of credit card debt, yet want me to make a $4,000 charge - the largest single charge I have ever made on a credit card to pay for their services. Do they help people or is it just an overcharged budget that I could do myself? Thanks for your help. Allen - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: Re: Money Mastery question Date: 24 Dec 1999 11:20:57 -0700 Allen Meyer wrote: > > Hello all, > > Has anyone out there heard of Money Mastery? If so, I would appreciate any > insights you may have. They sound like a reputable company, but my concern > is the price. It seems strange that they encourage people to get out of > credit card debt, yet want me to make a $4,000 charge - the largest single > charge I have ever made on a credit card to pay for their services. Do they > help people or is it just an overcharged budget that I could do myself? > > Thanks for your help. > > Allen > Allen, Trust your instincts! Turn and run away! It IS strange AND unreasonable to fork out $4k. Before you pay a dime, take a look at: http://www.go.com/WebDir/Consumer_Credit_Counseling_Service You should be able to find a non-profit, local credit counseling service to help you out. Or, you could rely on the members of our group for some advice (you can contact me privately if you wish). The bottom line is that you need two things: 1) A reasonable game-plan. 2) Some discipline. Money Mastery is not going to do any more for you than this. Don't pay $4k for this! Jeff - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: Re: Money Mastery question Date: 24 Dec 1999 11:21:10 -0700 Allen Meyer wrote: > > Hello all, > > Has anyone out there heard of Money Mastery? If so, I would appreciate any > insights you may have. They sound like a reputable company, but my concern > is the price. It seems strange that they encourage people to get out of > credit card debt, yet want me to make a $4,000 charge - the largest single > charge I have ever made on a credit card to pay for their services. Do they > help people or is it just an overcharged budget that I could do myself? > > Thanks for your help. > > Allen > Allen, Trust your instincts! Turn and run away! It IS strange AND unreasonable to fork out $4k. Before you pay a dime, take a look at: http://www.go.com/WebDir/Consumer_Credit_Counseling_Service You should be able to find a non-profit, local credit counseling service to help you out. Or, you could rely on the members of our group for some advice (you can contact me privately if you wish). The bottom line is that you need two things: 1) A reasonable game-plan. 2) Some discipline. Money Mastery is not going to do any more for you than this. Don't pay $4k for this! Jeff - ------------------------------------------------------------------------------- From: Ira Krakow Subject: Fidelity U-Plan, anyone? Date: 25 Dec 1999 11:34:17 -0500 Anyone use the Fidelity U-plan for saving for college for kids. The = plan appears to have attractive features. One of the features Fidelity = is pushing is that you can put up to $50K in the plan and avoid gift tax = (although it may be that you can't do any gifts for 5 years if you put = in that much). Also, the proceeds when taken out are taxed at the = child's rate. Any down sides (limits on investments, colleges that the kids may or may = not attend, what happens if the kids decide to do something else - can = they take the money and "run" away from college?). Happy holidays to all. Ira _________________________________________________________ Do You Yahoo!? Get your free @yahoo.com address at http://mail.yahoo.com - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: Re: HIDE CAPITAL GAINS Date: 25 Dec 1999 22:40:31 -0700 BOB FORD wrote: > > I am not a tax pro but I don't think it is > possible to hide any Capital Gains. > It is my understanding that if you sell > a capital asset at a profit, it must be > reported on your income tax and > there are no exceptions. You must > also report capital losses. > > Someone let me know if that is > incorrect. > > BOB FORD > BOB_FORD@COMPUSERVE.COM > Bob, You are correct in that you can't "hide" any capital gains other than the manner Rich explained. However, in my previous posting to your estate tax question, I talked about a private annuity. It turns out that this same private annuity can be used to defer (not avoid) capital gains taxes. The value of defering these taxes are that you can in effect hang on to the cash that you would otherwise be paying in taxes and benefit from the growth of this cash. If effect, you get to spread the payment of the taxes out over many years -- you are getting a zero interest loan from Uncle Sam. Combine this with the favorable estate planning characteristics of the Private Annuity and this can be a terrific planning tool under the proper circumstances. Jeff - ------------------------------------------------------------------------------- From: "Harold R. Justice" Subject: RE: Fidelity U-Plan Date: 26 Dec 1999 17:45:13 -0600 Ira, I checked into this once and was told off-campus housing and off-campus meals are not valid expenses. This is a reimbursement account so you have to accumulate valid expenses, such as paid tuition, and then you ask for reimbursement. I concluded that the paper work involved was too much and the fact that most kids live off campus would greatly cut out valid expenses. Room, board, and clothes cost much more than tuition at most colleges. Harold > > > ------------------------------ > > Date: Sat, 25 Dec 1999 11:34:17 -0500 > From: Ira Krakow > Subject: Fidelity U-Plan, anyone? > > Anyone use the Fidelity U-plan for saving for college for kids. The = > plan appears to have attractive features. One of the features Fidelity = > is pushing is that you can put up to $50K in the plan and avoid gift tax = > (although it may be that you can't do any gifts for 5 years if you put = > in that much). Also, the proceeds when taken out are taxed at the = > child's rate. > > Any down sides (limits on investments, colleges that the kids may or may = > not attend, what happens if the kids decide to do something else - can = > they take the money and "run" away from college?). > > Happy holidays to all. > > Ira - ------------------------------------------------------------------------------- From: Ira Krakow Subject: Take distributions from IRA or from taxable accounts at retirement? Date: 27 Dec 1999 20:28:47 -0500 I saw an interesting article in the Motley Fool retirement bulletin = board, at: http://www.fool.com/retirement/retireeport/1999/retireeport991227.htm The author suggests that when withdrawing funds where there is a mixture = of IRAs and taxable accounts, it might not be too bad an idea to = withdraw from the IRAs first. From the perspective of tax efficiency = for the *entire* family (including the heirs), the heirs owe taxes on = any part of an inherited IRA (at *their* marginal tax rate) on which = taxes haven't been paid, so drawing down the IRA will have a positive = benefit to heirs by reducing their tax burden. =20 On the other hand, the retiree owes more taxes by using this strategy, = since taxes have already been paid on the taxable accounts. The article = contains a number of scenarios and charts (variables such as the = marginal tax rate of the heirs, and percentage of assets to be withdrawn = among these accounts are taken into account). =20 Where's the balance between the retiree paying less tax and the heirs = paying less tax? What considerations should be given? Ira __________________________________________________ Do You Yahoo!? Talk to your friends online with Yahoo! Messenger. http://messenger.yahoo.com - ------------------------------------------------------------------------------- From: Ira Krakow Subject: Coke or Yahoo - which is the better buy? Date: 27 Dec 1999 20:37:17 -0500 Another interesting thread on the Motley Fool was about investing in = Coca Cola (KO-NYSE) or Yahoo (YHOO-NASDAQ). We've discussed the through = of investing in quality companies that are brand leaders in their = market. Certainly Coke and Yahoo qualify. The problem I have is - what's the right price for these stocks? Right = now, Coke is trading at 60, with a P/E of 48. Yahoo is at 415, with a = P/E of 1610 (!). I understand that it's going to be hard for Coke to double their market = share, and that search engines (er, portals, or whatever they're calling = them) is The Greatest Growth Opportunity Of The Millenium (this one or = next, I'm not sure). So, are both overpriced, both underpriced? Do you believe the Efficient = Market Theory, that the market is pricing each at their fair value? If = P/E isn't a valid metric, what is? Ira __________________________________________________ Do You Yahoo!? Talk to your friends online with Yahoo! Messenger. http://messenger.yahoo.com - ------------------------------------------------------------------------------- From: Jacqueline.D.Richardson@Hitchcock.ORG (Jacqueline D. Richardson) Subject: Re: AVOID ESTATE TAXES Date: 27 Dec 1999 20:47:32 EST --- Jeff wrote: So, to summarize, this technique works best when: 1. You have an asset you want to transfer to your heirs. 2. You are willing to give up the asset in return for an life-time annuity income stream. 3. The asset is capable of producing enough income to fulfill the annuity income stream obligation. This requirement is usually = easier to fulfill than you may think. 4. As a bonus, the private annuity can be used to defer capital = gains taxes. I'll talk about this in reply to your posting about capital gains. --- end of quote --- If I am reading this correctly you are transferring ownership to = your heirs (in my case, my sons). What happens if they should get = divorced? Does/could this asset, say an apartment building, get = split up/lost in the divorce settlement? If so, what happens to my = income I was counting on for my golden years? Thanks Jackie in VT Jacqueline.D.Richardson@Hitchcock.org - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: Re: AVOID ESTATE TAXES Date: 28 Dec 1999 10:08:33 -0700 "Jacqueline D. Richardson" wrote: > > --- Jeff wrote: > So, to summarize, this technique works best when: > > 1. You have an asset you want to transfer to your heirs. > > 2. You are willing to give up the asset in return for an life-time > annuity income stream. > > 3. The asset is capable of producing enough income to fulfill the > annuity income stream obligation. This requirement is usually easier to > fulfill than you may think. > > 4. As a bonus, the private annuity can be used to defer capital gains > taxes. I'll talk about this in reply to your posting about capital > gains. > --- end of quote --- > > If I am reading this correctly you are transferring ownership to your heirs (in my case, my sons). What happens if they should get divorced? Does/could this asset, say an apartment building, get split up/lost in the divorce settlement? If so, what happens to my income I was counting on for my golden years? > Thanks > Jackie in VT > Jacqueline.D.Richardson@Hitchcock.org > > - Jackie, Until you die, the asset is held in trust for the future benefit of your heirs. Full ownership does not actually pass to your heirs until you die. Therefore, the asset (and your retirement income) would be shielded from any of your sons' divorce settlements while you are alive. Regards, Jeff -