ftp.xmission.com/2014.06.ftp.xmission.com.tar/ftp.xmission.com/pub/lists/persfin/archive/persfin.199903

Internet Message Format | 1999-03-30 | 34KB

From: David Stanowski <[e-mail]>
Subject: Tax Questions
Date: 09 Mar 1999 01:27:58 -0500

         My wife and I have been living in our present location for
         several years and have been running two small businesses; a =

         Limited Partnership and a C Corporation. We need a change,
         and would like to try living in a variety of different places
         for a few months at a time. The easiest way to do this would
         probably be to work as Temps, or possibly short-term employees =

         of various businesses, however, we would like to do it through =

         our own business in some form. Our first thought was to use =

         our C Corporation for this purpose, in order to retain its =

         benefits package. But after surveying the set up fees for
         foreign corporations, in various locals, and considering the
         fact that we might stay in a given state for less than a year, =

         using a corporation seems less desirable. Therefore, we are =

         considering the use of a Sole Proprietorship, which may be =

         more practical in these circumstances. My questions have to =

         do with using a Sole Proprietorship as our own "Temp/staffing
         agency".
         =

         I would act as a Sole Proprietor and hire my wife as an em-
         ployee (yes, she would be a legitimate employee) and obtain a =

         tax ID# for the business. The business would be run out of a =

         home office. I would attempt to sell our individual services =

         at a better rate than another Temp agency would get for us. =

         =

         Questions:
         =

         1. I know that I can supply medical insurance to an employee
         and that it is fully deductible to me, as the owner, and not =

         counted as wages to the employee. Is there any difference in =

         the tax treatment of medical insurance if the employee is my =

         wife? Can the insurance that I provide to my employee/wife =

         include coverage for me, as her family member, and still be =

         fully deductible and not counted as income to me? Can I give =

         my employee a dental plan, a vision plan and/or a medical re-
         imbursement plan, as well as medical insurance, and have it =

         be fully deductible to me, as the owner, and not counted as =

         wages to the employee? Can these additional benefits that I =

         provide to my employee/wife include coverage for me, as her =

         family member, and still be fully deductible to me, as the =

         owner, and not counted as income to me? =

         =

         If this arrangement will work for my wife, but not for me, can =

         my wife start her own Sole Proprietorship and hire me as an =

         employee? =

         =

         Are there any special tax rules that cover an employee that
         is your spouse?
         =

         2. Some businesses that use Temp/staffing agencies, want to
         see that all the people that they hire from the agency are
         current on FICA and other withholding. Can a Sole Proprietor
         pay himself a salary, rather than taking a draw, if it serves
         a particular business purpose such as this?
         =

         3. If my business is based in a home office, and we start =

         the day by working in our home office, can we both deduct the =

         mileage that we drive to the businesses that hire our Temp/
         staffing agency? I believe that businesses operating out of a
         home office do NOT have to count any commuting miles? =

         =

         4. When you set up a business in one location, you get a Tax
         ID# that's based on your location. When you move your business  =

         to a new location, do you have to get a new Tax ID#, or can =

         you continue to use the old one?
 =




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From: Klein Steven <[e-mail]>
Subject: insurance question
Date: 09 Mar 1999 10:21:11 -0500

Recently my insurance company decided not to renew my homeowners insurance.
The reason they gave me for non-renewal was frequency of claims. The policy
started in 1994. I had one claim for borken water pipe ($8700.00) that was
paid in 1/96. In fall of 1997 my wife lost her engagement ring. I did not
have extra coverage for mysterious lost of items. However, my agent said I
should file a claim anyway, maybe they would cover the ring, which I did.
The claim for the ring was rejected and no money was paid.

However the insurance company (ERIE), now won't renew me because of 2 claims
within a 7 year period. The fact that one of the claims, no money was paid,
seems to not matter. Also I mentioned, the fact the agent suggested I file
the ring claim, seems to not matter.

Is this legal, and is there anything I can do about this.

Sklein



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From: Rich Carreiro <[e-mail]>
Subject: Re: What is the difference between Spdr and S&P500 mutual funds?
Date: 10 Mar 1999 07:57:39 -0500

The structure is different.  SPDRs are units of a unit trust.  The
trust owns the underlying stocks and does not trade them other than to
match changes in the index composition. The trust units trade on the
open market like stocks and can be bought and sold at any time during
the day, not just at the end of the day.  SPDRs have annual fees
comparable to index funds (I believe SPY's fee is currently 0.18%,
compared to VFINX's 0.19%).

Go to www.nasdaq-amex.com and poke around until you get to the links
on SPDRs.  The entire prospectus is there as well as a host of other
information about them.

Rich Carreiro
[e-mail]
P5-100/RedHat Linux 4.2

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From: "Jeff Salisbury" <[e-mail]>
Subject: Social Security trap...
Date: 10 Mar 1999 11:30:34 -0700

Greetings,

I read an article last night in my local newspaper on Social Security -- I
thought it was outstanding.  The basic points of the article were:

1. Every American pays 12.4% of their annual wages (the first $68,400) into the
Social Security system.

2. The return on this "investment" is pathetic.

3. Because many Americans are unable to save/invest sufficiently beyond this
12.4%, and because the Social Security benefits are so meager, they will be
trapped into a poverty level retirement.

While I believe this article is right on target, I am aware of the dilemma of
scrapping the current system.  How can we make the transition without leaving
the people already trapped out in the cold?  Perhaps this is another example of
governmental good intentions gone awry...

I've included the full text of the article below...

Best Regards,

Jeff Salisbury


##################################################################

The following story appeared on deseretnews.com on March 08, 1999, 12:00 AM MST

========

Headline: Stop the Social Security poverty machine

Author: By James Ferrin



Before we clamor to "save" Social Security, let's first understand what we are
trying to "save." The Social Security retirement system requires every working
American to pay 12.4 percent of his or her income into the system. The 12.4
percent is a tax on compensation -- wages or business profits. It is a nearly
invisible tax to most Americans because one-half is withheld from the paycheck
and one-half is paid by the employer with funds that could have been, but
weren't, paid to the employee.

The Social Security tax is not reported or itemized on the tax return for
anyone
but the self-employed. In this sense it is an enormous but somewhat invisible
tax. In exchange, the worker receives a hope for a retirement cash flow
starting
at age 62, or 65 or sometime; the dates are subject to change. Today's retirees
can collect "normal" benefits at age 65. Under rules adopted in 1981, those of
us born after 1938 (including close to 80 million baby boomers) will qualify
for
benefits at a later age. The Social Security Administration recently notified
me
that under current rules, because I was born in 1956 (right in the middle of
all
those baby boomers) I can currently hope to qualify for normal benefits at age
66 and four months.

Do you know how much Social Security retirement tax you paid last year? I think
most people have very little idea. Take 12.4 percent of your earned income
(like
wages) to a maximum wage base of $68,400. Anybody making $68,400 or more last
year paid $8,109 in Social Security retirement tax -- not federal or state
income tax -- that's extra. I'm talking about over $675 per month just in
Social
Security retirement tax. This is a fairly significant monthly investment.

In fact, the unfortunate reality for many Americans is that it is the only
monthly investment they can make. After paying it, along with all the other
taxes and living expenses, there is precious little left over for saving and
investing for retirement. Most working-class Americans live paycheck to
paycheck, unable to save and invest over and above what Social Security takes.
So, predictably, we produce yet another generation dependent on Social
Security.

How about that Social Security retirement? Yes sir, can't you just wait till
those nice, fat Social Security checks start rolling in? We instantly
recognize,
of course, the sarcasm. The fact is that Social Security offers only a
poverty-level subsistence. Today's highest monthly benefit is about $1,200 per
month. The average monthly benefit is just over $700. Is this a livable income
or is this poverty? The Social Security Administration projects that if I am
fortunate enough to live another 24 years, paying over $700 per month into
their
system, that I will qualify for a retirement income of $1,630 per month.

How fortunate I am that I am able to save and invest my own funds over and
above
what the Social Security tax confiscates from me, because living on $1,630 per
month 24 years from now will be poverty-level misery. But what about the
millions of Americans who are not able to actively save and invest, those who
pay 12.4 percent of their income in Social Security tax and have little or
nothing more to invest? The answer is clear. They will be poverty stricken old
folks fully dependent on government, and they will have paid 12.4 percent of
their income every month and every year throughout their working lives to get
there. I can only think to call it the Great American Poverty Machine, for so
it
is.

No, we should not attempt to "save" such a system. We ought not even wish it
upon our worst enemies, much less on ourselves, our children and grandchildren.
We should not hope that Social Security will "be there" for us or for them. We
should hope and pray that American politicians will end the politics and
socialization of America's precious, sacred investment capital and will end
Social Security as we know it.

Working-class Americans, the poor, the middle classes, these folks are the ones
most hurt by the Social Security poverty machine because they cannot escape it
like higher income earners can. These traditional constituencies of the
Democratic Party ought to be screaming to their representatives not to "save"
the system, but to replace it -- replace it with a fully privatized Individual
Retirement Account. Democrats and Republicans alike should be united to
eliminate the old system in favor of a completely new privatized retirement
program.

Let Americans save and invest their own hard-earned money without government
interference. Anyone who really saves and invests 12.4 percent of their income
can, over their working lifetimes, make themselves financially independent
millionaire retirees, not poverty-stricken elderly of the "Social Security
class," regardless of the job they choose.

Social Security is, in fact, the single tallest, most difficult hurdle standing
between most working-class Americans and their hopes for security in their
senior years. Let's recognize this fact, and let's end it now.



James Ferrin is a certified financial planner based in Orem.

----------

Copyright 1999, Deseret News Publishing Co.




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From: "Tricia P" <[e-mail]>
Subject: Re: Social Security trap...
Date: 10 Mar 1999 11:31:28 PST


Whoops!  I sent a response to Jeff's posting earlier but it was too
long.  Will try again...so you can disregard the first one, Jeff.
Anyway, I, for one, am really wondering how "privatizing" social
security is really going to help it.  I mean, obviously some changes
need to be made, but I don't know see how trusting it to some stock
brokerage or financial institution is going to make it so much better,
as some people seem to believe.  I can't say that I necessarily trust
these folks anymore than I do my government.  Plus, there are some
public services that I just don't think belong in private hands, and
this is one of them.  Another thing to consider is that a lot of people
aren't going to know how to invest these funds in their privatized IRA
accounts.  I know people in their 20's and 30's who have their 403(b)
and 457 funds invested in GIC's.  The returns on those aren't any better
than the ones social security can expect.  I should add that I
absolutely *don't* have a problem with the gov't diversifying at least
some of it's investments into something other than treasury bonds, but I
am dead sent against privatization.  I don't see how it's going to make
the system so much better, especially if the gov't decides to diversify
it's investments, and it seems to me that someone stands to make some
big fat profits off this...and I bet they're the ones who are screaming
the loudest for privatization.
Get Your Private, Free Email at http://www.hotmail.com

-


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From: "Tricia P" <[e-mail]>
Subject: Re: Social Security trap...
Date: 10 Mar 1999 11:11:41 PST

I suppose I'm opening myself up to be flamed, but I guess I don't
understand why privatizing it is going to make it so much better, as
some people seem to believe.   Why should I trust some investment
company or stock brokerage any more than the government?  I think there
are some things that are better left in public control, and this is one
of them.  Plus, without adequate financial knowledge, how are people
going to know how to invest those funds in their privatized IRA's?  I
already know people who invest their 403(b) money in GIC's...and these
are people in their 30's and 40's!  They aren't going to be getting any
better returns than what social security is getting.  I do agree that
things need to change, but some of these solutions I find a little
unsettling.  Sounds like some of these arguments could potentially be
coming from people who could stand to make a pretty penny off it...like
brokers and financial institutions.




>From: "Jeff Salisbury" <[e-mail]>
>Reply-To: [e-mail]
>To: [e-mail]
>Subject: Social Security trap...
>Date: Wed, 10 Mar 1999 11:30:34 -0700
>
>Greetings,
>
>I read an article last night in my local newspaper on Social Security
-- I
>thought it was outstanding.  The basic points of the article were:
>
>1. Every American pays 12.4% of their annual wages (the first $68,400)
into the
>Social Security system.
>
>2. The return on this "investment" is pathetic.
>
>3. Because many Americans are unable to save/invest sufficiently beyond
this
>12.4%, and because the Social Security benefits are so meager, they
will be
>trapped into a poverty level retirement.
>
>While I believe this article is right on target, I am aware of the
dilemma of
>scrapping the current system.  How can we make the transition without
leaving
>the people already trapped out in the cold?  Perhaps this is another
example of
>governmental good intentions gone awry...
>
>I've included the full text of the article below...
>
>Best Regards,
>
>Jeff Salisbury
>
>
>##################################################################
>
>The following story appeared on deseretnews.com on March 08, 1999,
12:00 AM MST
>
>Headline: Stop the Social Security poverty machine
>

   <big snip>

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From: Klein Steven <[e-mail]>
Subject: auto donation
Date: 15 Mar 1999 11:12:17 -0500

I will be buying a new car shortly. I want to donate my old clunker to
charity.,Will my income be reduced by the amount of the blue book value? or
will my actually taxes owed be less the blue book value? In other words,
Lets say the car is worth $1000 and I make $50000 a year in salary. Will I
pay taxes on $49000 (50k - 1k) or will I pay taxes on 50k then have apply a
tax credit of 1k?

I hope this makes sense.

SK


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From: [e-mail]
Subject: Rules for estimating value of goods donated
Date: 15 Mar 1999 11:28:01 EST

My sister recently donated a mattress/box spring, and an almost-new
couch to a charity.  The charity provided her with a blank receipt
and said to fill it in with whatever they think is appropriate.It's
definitely more than $250 (the amount the IRS requires a receipt for?),
but she doesn't know what to put in there that's fair and won't cause
the IRS to question it.

Does anyone know of a site that states what the value of used goods
are so she can use that on her receipt?Or any info on this type of
thing in general would be helpful.

Thanks,
Juan

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From: Rich Carreiro <[e-mail]>
Subject: Re: Social Security trap...
Date: 15 Mar 1999 12:05:25 -0500

>1. Every American pays 12.4% of their annual wages (the first $68,400) into the
>Social Security system.

Two points...

(a) For 1999, the FICA limit is $72,600, not $68,400.

(b) I am a bit suspicious of the Ferrin story posted because of
    the claim that people pay 12.4% towards SSN.  The author of
    the story is claiming that the 6.2% of salary that the employer
    pays should be counted as tax paid by the employee because if
    the employer-side tax wasn't levied, that money would have been
    paid to the employee.

    That is, simply, a ludicrous argument.  I have to be very suspicious
    of someone so ignorant (or willfully ignoring) of basic economics
    in the cause of trying to make a rhetorical point.  If the employer-side
    SS tax was abolished tomorrow, I guarantee you that wages would not rise
    6.2% in the aggregate.  It depends very much on the price elasticity of
    labor.  In hot fields, most or all of that 6.2% would go to the worker.
    In fields where there is an oversupply of labor, most or all of the 6.2%
    would be kept by the company to increase its profit.  For other fields,
    it'll be somewhere in the middle.

I note that I consider SS a fraudulent cross-generational ponzi scheme that
is horrible for anyone in their 30s or younger.  Nonetheless, I have to rail
at the use of bogus statistics, since doing so will not ultimately help the
cause of fixing SS (for the record, "fixing" SS in my book means giving people
actual ownership in their SS "accounts", requiring them to buy an annuity so
that even if all their other investments totally fail, they'll have some money
in their SS accounts when they retire, and letting them invest how they please
with the rest).

Rich Carreiro
[e-mail]
P5-100/RedHat Linux 4.2

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From: David Hodges <[e-mail]>
Subject: Basis question
Date: 15 Mar 1999 20:02:39 -0500

I have been doing my elderly mother's taxes for several years now, with the
help of TurboTax, and so far haven't encountered anything I couldn't
handle. This one has me stumped, though.

My late father once bought a few shares of AT &T apparently directly from
the company, not through a broker. This year AT &T must have converted some
of those shares to Lucent stocks because my mother now owns some Lucent and
she got a 1099-B from AT &T for about $2000. I want to report this sale but
my mother has no knowledge of when the stock was bought or how much my
father paid for it. So, what do I use for a basis? Does she have to pay
capital gains on the whole amount? TurboTax is silent on this issue!

Thanks,
David Hodges



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From: "L. Chen" <[e-mail]>
Subject: Re: Social Security trap...
Date: 16 Mar 1999 00:31:42 -0500 (EST)


> .................
> Working-class Americans, the poor, the middle classes, these folks are the
> ones most hurt by the Social Security poverty machine because they cannot
> escape it like higher income earners can...........
>
> Let Americans save and invest their own hard-earned money without government
> interference. Anyone who really saves and invests 12.4 percent of their
> income can, over their working lifetimes, make themselves financially
> independent millionaire retirees, not poverty-stricken elderly of the
> "Social Security class," regardless of the job they choose.

Regardless of its billing, Social Security is just another social program.
[It is not insurance; nor is it a retirement plan.]

For the "poor", they *wouldn't* have saved anything for their old age if the
SS were not deducted from their pay check; and therefore *wouldn't* have the
money to invest for their retirement.




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From: BOB FORD <[e-mail]>
Subject: Social Security
Date: 15 Mar 1999 22:06:00 -0500

I am not here to defend Social Security.  However the article
by James Ferrin is very misleading.  Let have "Just the facts" =

as an old TV show character was fond of saying.  =

                                        =

>Author: By James Ferrin                     =

>Before we clamor to "save" Social Security, let's first
>understand what we are trying to "save." The Social Security
>retirement system requires every working
>American to pay 12.4 percent of his or her income into the
>system.
 =

This is just not true.  Can anyone show me a copy of their W2
form where they paid over 6.2 percent of their wages as Social
Security taxes.  Social Security taxes for a wage earner are 6.2
percent of the first $68,400.   =


> The 12.4 percent is a tax on compensation -- wages or
>business profits. It is a nearly invisible tax to most Americans
>because one-half is withheld from the paycheck

Every check stub I have seen clearly shows the amount being
withheld for Social Security taxes so it is clearly VISIBLE.

>and one-half is paid by the employer with funds that could
>have been, but weren't, paid to the employee.
 =

I have had employees in my business.  As a business owner, I
paid a variety of taxes.  Federal and State income taxes, sales
taxes, unemployment taxes, state disability taxes and of course
taxes on the wages of my employees.  Does anyone think that
it they change the law today that I did not have to pay Social
Security taxes on my employees wages, I would call in each
employee and say "This 6.2 percent tax I have been paying on
your wages is really yours and I will now pay it to you".  As
Brian Benben would say "Dream On".  Anything "the
government" requires me to pay is a tax.  If I don't have to pay
the tax, I make more profit.  If I no longer had to pay sales tax,
would I say to my employees, "I no longer have to pay sales
tax so I will give that money to you"?

>The Social Security tax is not reported or itemized on the tax
>return for anyone but the self-employed. In this sense it is an
>enormous but somewhat invisible tax.

Has anyone received a W2 form that did NOT show how much
Social Security they paid in the last year?  How could it be
invisible?

>In exchange, the worker receives a hope for a retirement
>cash flow starting at age 62, or 65 or sometime; the dates are
>subject to change. Today's retirees can collect "normal"
>benefits at age 65. Under rules adopted in 1981, those of
>us born after 1938 (including close to 80 million baby
>boomers) will qualify for benefits at a later age. The Social
>Security Administration recently notified me that under
>current rules, because I was born in 1956 (right in
>the middle of all those baby boomers) I can currently hope to
>qualify for normal benefits at age 66 and four months.
 =

The worker also receives the following additional benefits

1. The workers spouse will receive 50 percent of what the
worker will receive.

2. The workers children will receive money until they are
adults if the workers die.

3. The workers children if the become disabled before they
reach the age of 22 will receive benefits.

4. The worker will receive benefits if he/she become disabled
and is unable to work.  The benefits continue for life.

5.  When the workers die, the workers spouse will get benefits
until the spouse dies.

6.  The worker will receive medical and hospital insurance at a
very cheap rate that lets them choose their doctor and hospital.
There is not a test for a prior medical condition.

7.  If the worker needs more money after age 65 and is poor a
Supplemental Social Income will be give him/her.

>I'm talking about over $675 per month just in Social
>Security retirement tax. This is a fairly significant monthly
>investment.

The most anyone paid in Social Security taxes is $354 per
month. =


>In fact, the unfortunate reality for many Americans is that it is
>the only monthly investment they can make. After paying it,
>along with all the other taxes and living expenses, there is
>precious little left over for saving and investing for retirement.
>Most working-class Americans live paycheck to paycheck,
>unable to save and invest over and above what Social
>Security takes. So, predictably, we produce yet another
>generation dependent on Social Security.

It is hard to believe that anyone making $68,400 (the Social
Security maximum wage) can not save any money for their
retirement. When I worked for wages, I made a lot less than
$68,400 and I saved and invested a lot of money.
 =

>How about that Social Security retirement? Yes sir, can't you
>just wait till those nice, fat Social Security checks start rolling
>in? We instantly recognize, of course, the sarcasm. The fact is
>that Social Security offers only a poverty-level subsistence.
>Today's highest monthly benefit is about $1,200 per
>month. The average monthly benefit is just over $700. Is this
>a livable income or is this poverty?

Neither $700 or $1200 is a livable income.  But who said it
should be.  If you don't save for your retirement, you will be
poor in your retirement.  Why would anyone think that Social
Security has to be the ONLY income we get in retirement.

> The Social Security Administration projects that if I am
>fortunate enough to live another 24 years, paying over $700
>per month into their system, that I will qualify for a retirement
>income of $1,630 per month.
 =

Again, no one pays $700 per month into Social Security.

>James Ferrin is a certified financial planner based in Orem.
 =

The question of whether Social Security is a good investment
is a good one.  To find out, consider what it would cost to get
the same benefits as you get from Social Security from a
private source.  You can talk to insurance companies and ask
to give you a quote on what it would cost to duplicate the
Social Security benefits I have listed above. I bet you will find
that it will cost a lot more than 6.4 percent of your pay.

BOB FORD

[e-mail]
http://ourworld.compuserve.com/homepages/BOB_FORD/
Editor of the 57-56-55 CHEVY LIST and TURBOGLIDE
REGISTRY



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From: BOB FORD <[e-mail]>
Subject: SOCIAL SECURITY
Date: 16 Mar 1999 10:30:51 -0500

>From: "Tricia P" <[e-mail]>
>Subject: Re: Social Security trap...             =


>Anyway, I, for one, am really wondering how "privatizing"
>social security is really going to help it.  I mean, obviously
>some changes need to be made, but I don't know see how
>trusting it to some stock brokerage or financial institution is
>going to make it so much better,  as some people seem to
>believe.  I can't say that I necessarily trust these folks
>anymore than I do my government.

A lot depends on what you mean by "privatizing" social
security. I don't see "privatizing" meaning trusting it to some
brokerage or financial institution.  It seem reasonable to me
that people should have the choice of what kind of retirement
plan they want to participate in.  The current social security tax
on wages is 6.2 percent of the first $68,400.  Shouldn't a
person be free to choose what kind of a retirement plan their
money goes into? =


>Plus, there are some public services that I just don't think
>belong in private hands, and this is one of them.

Why shouldn't MY money for MY retirement be placed in
private hands if I want it to be.   I might do better than the
government or I might do worse.  Some people might want the
government to provide for their retirement and some people
might not.  It should be their choice.

>Another thing to consider is that a lot of people aren't going
>to know how to invest these funds in their privatized IRA =

>accounts.

This is true.  So who will suffer if they make bad investments in
their IRAs?

>I know people in their 20's and 30's who have their 403(b) =

>and 457 funds invested in GIC's.  The returns on those aren't
>any better than the ones social security can expect.

This is true.  They will suffer the consequences for making bad
investments.

> I should add that I absolutely *don't* have a problem with
>the gov't diversifying at least some of it's investments into
>something other than treasury bonds, but I am dead sent
>against privatization.  I don't see how it's going to make =

>the system so much better, especially if the gov't decides to
>diversify it's investments, and it seems to me that someone
>stands to make some big fat profits off this...and I bet they're
>the ones who are screaming the loudest for privatization.

The ones that will make some big fat profits off this are the
people that will get Social Security benefits.  Almost all state
employee retirement plans give larger benefits per dollar paid in
than does Social Security.   How could this be?  Simple, they
just make better investments.  If states can do, why can't the
U.S. Government do it?

Shouldn't we have a system where the money for a persons
retirement is placed in a system of their choice?  If a person
wants to go with the current Social Security system, fine.  If
they think they can do better on their own, give it a try.  If they
are wrong, they will just have less money for your retirement.

BOB FORD
[e-mail]
http://ourworld.compuserve.com/homepages/BOB_FORD/
Editor of the 57-56-55 CHEVY LIST and TURBOGLIDE
REGISTRY

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From: BOB FORD <[e-mail]>
Subject: persfin-digest
Date: 30 Mar 1999 11:19:34 -0500

Jeff

I have not received a personal finance digest in a long time.  Has my
e-mail
address fell off your list?

BOB FORD

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From: Richard Alpert <[e-mail]>
Subject: Re: donating a car
Date: 30 Mar 1999 13:55:49 -0500

Klein Steven <[e-mail]> asked about auto donation.  A few weeks
ago, there was an article about this in "Business Week".  I'll try to
find a reference and post it to the list.  In the meantime, try their
web site (www.businessweek.com).

I'll be donating my old car soon, too.

 - Rich Alpert

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From: Rich Carreiro <[e-mail]>
Subject: Re: auto donation
Date: 30 Mar 1999 19:05:27 -0500

>I will be buying a new car shortly. I want to donate my old clunker to
>charity.,Will my income be reduced by the amount of the blue book value? or
>will my actually taxes owed be less the blue book value? In other words,
>Lets say the car is worth $1000 and I make $50000 a year in salary. Will I
>pay taxes on $49000 (50k - 1k) or will I pay taxes on 50k then have apply a
>tax credit of 1k?

(1) It's not what the blue book says that counts, it's the actual value of
    your car.  So if the BB says your car is worth $3000, but your car is
    in a lot worse condition than the "reference car" that the BB bases its
    numbers on, you're cheating if you use the $3000 figure.

(2) You can only get the tax benefit of the donation if you itemize your
    deductions.  And for the vast majority of people, it only makes sense
    to itemize if total itemized deductions are greater than the
    standard deduction.  So if the std deduction is greater than your
    total itemized deductions, you won't get any tax benefit from the
    donation.

(3) Assuming you get the benefit of the donation, it'll reduce your
    taxable income.  The way things work is that you compute your
    gross income.  You then apply certain things to it (like alimony,
    deductible IRA contributions, student loan interest, etc) to arrive
    at adjusted gross income.  From that you subtract your deductions
    (by they itemized or standard) and personal exemptions to arrive at
    taxable income, which is what you are taxed on.  Assuming you are
    already itemizing, the donation will increase your itemized deductions
    by $1000, which will reduce your taxable income by $1000, and thus lower
    your taxes by $1000 times your marginal tax rate.

Rich Carreiro
[e-mail]
P5-100/RedHat Linux 4.2

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