From: owner-persfin-digest@lists.xmission.com (persfin-digest) To: persfin-digest@lists.xmission.com Subject: persfin-digest V5 #109 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 Tuesday, November 30 1999 Volume 05 : Number 109 In this issue of the Personal Finance Digest: Still Supporting Your Adult Children? Consider This Option Capital gain netting rules 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) 1999, 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.com, text: unsubscribe persfin-digest ---------------------------------------------------------------------- Date: Mon, 29 Nov 1999 10:19:12 -0700 From: Jeff Salisbury Subject: Still Supporting Your Adult Children? Consider This Option 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. - - ------------------------------ Date: 30 Nov 1999 00:01:06 -0500 From: Rich Carreiro Subject: Capital gain netting rules 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 - - ------------------------------ End of persfin-digest V5 #109 ***************************** - 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.