Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, January 17, 1994 TAG: 9401140377
SECTION: MONEY PAGE: A-8 EDITION: METRO
SOURCE: MAG POFF
DATELINE: LENGTH: Medium
When my wife is 62, will she be eligible for Social Security as well as a portion of my Railroad Retirement?
A: James Harris, assistant manager of the Roanoke Social Security office, said your wife must meet the threshold requirement of having worked enough quarters under Social Security to qualify for benefits.
Even if she has worked long enough to qualify, she may not get benefits.
Harris said she will lose one dollar of Social Security for each dollar she receives under Tier I Railroad Retirement.
Because it seems likely that her payment under Railroad Retirement will exceed her Social Security, she may not qualify for benefits.
Harris advised you to contact the Railroad Retirement Board about her benefits. The staff there can make the calculation for you.
Taxing tobacco
Q: I am a flue-cured tobacco farmer operating under the quota system of the U.S. Department of Agriculture. I have a quota of 100,000 pounds, which I purchased at different times for a range of $1 to $3 a pound.
How are taxes treated on the sale of some of the quotas? If I sell 3,000 pounds, would it be the $3 pounds or $1 pounds? Or does it work by date of purchase, so that the last pounds purchased are the first sold? Or are the first quotas purchased the first sold? I want to sell just a part of it.
A: F. Fulton Galer, a certified public accountant with the Roanoke firm of McLeod & Company, said the basis for determining gain or loss on the sale of the quotas would be the amount you paid for those you sell - provided they are represented by some type of certificate or otherwise can be identified.
If the quotas sold cannot be specifically identified, you might have to consider the Internal Revenue Service rules for stocks, bonds and other securities. They state that if the securities sold cannot be specifically identified, the basis to be used is the price paid beginning with the first quotas you purchased.
If you can specifically identify the quotas being sold, Galer advised you to sell the quotas with the highest basis to minimize any capital gain.
Growing quotas are capital assets in the hands of a taxpayer, he said, so the length of the holding period determines whether the gain on their sale is a long-term or short-term capital gain.
The quotas, he said, are considered intangible assets with an indefinite life. They are not depreciable or amortizable. Your basis should be your original cost.
If you acquired these quotas along with the purchase of land, he added, some of the purchase price must be allocated to the quotas. These quotas are allocated to each county in Virginia and cannot be sold across county lines without approval of the Department of Agriculture.
Transfer, don't roll over
Q: I have four IRA certificates of deposit that will mature this year. I plan to redeem these certificates and invest in mutual funds. In all of the prospectuses from companies offering IRA funds, they state that only one tax-free roll-over is allowed every 12 months.
Does this mean that if I roll over the money from the first certificate, I would have to use the transfer method to invest in other mutual funds when the other certificates mature to keep from paying the 20 percent withholding?
A: The provision for 20 percent withholding applies to pension plans, such as the 401(k), not to Individual Retirement Accounts. IRAs that are rolled over more than once every 12 months become subject to tax.
Mary Ann Cummings, who works in retirement services for First Union National Bank in Roanoke, said the law prevents rolling over IRA money more than once in a 12-month period. In your case, she said, you can roll over only the first IRA on a tax-free basis. The other three must be transferred directly from one trustee to the trustee of your new IRA.
Cummings suggested that you transfer all four accounts instead of taking a distribution and reinvesting within 60 days. This would save you the trouble of reporting the roll-over to the IRS.
Correction
It was erroneously stated in this column Jan. 3 that the owner of an IRA account must be 55 years old to begin withdrawing money in equal installments without penalty. It is possible to do this at any age with equal installments based on life expectancy according to government tables. The younger the saver, the smaller each installment. Once started, the owner must continue this for five years or until age 59 1/2, whichever comes first.
Mag Poff will help find answers to your personal finance questions. Send them to her at the Roanoke Times & World-News, P.O. Box 2491, Roanoke 24010. Or leave a recorded message by calling (703) 981-3434 and when asked for a mailbox number, press 66639 (MONEY), followed by the # symbol.
by CNB