Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, August 22, 1994 TAG: 9408220052
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: Mag Poff
DATELINE: LENGTH: Medium
A: Kenneth Schrad, spokesman for the Virginia Corporation Commission, said a California court has approved a rehabilitation plan for the former Executive Life Insurance Co, which has failed.
Policyholders should have received a packet of information about this rehabilitation plan. It gives policyholders two choices, neither particularly attractive.
One option is to convert to coverage through Aurora National Life Insurance Co., which Schrad said is licensed to do business in Virginia.
The second choice is to opt out of the rehabilitation plan and wait for distribution of funds at an unspecified time.
Any policyholder with questions can call a toll-free number for more information. The number is 1-800-444-3542.
Finance it yourself
Q: Please discuss the pros and cons of owner financing from the seller's position.
We are planning to sell a remote vacation cabin in Northern Maine, which we own free and clear. Local real estate agents have told us that it could take up to three years to find a buyer. Also, there will be considerable profit and thus considerable capital gains tax.
How is the capital gains tax handled when a sold property is financed over a period of time? If owner financing could be beneficial to us, what financing terms should we propose? We are in our mid-60s and have no current need for the money.
A: Owner financing is a good option provided that you really have no need for the money. Your money will be tied up for the life of the loan, which presumably will be for many years.
Harry Schwarz, a certified public accountant with the Roanoke firm of H. Schwarz & Co., said Section 453 of the federal tax code permits election of an installment sale.
Schwarz said such a method is an excellent way to defer taxes rather than to recognize a lump sum gain at one time.
You will also be able to earn interest on your principal as the installments are paid. If you take a lump sum, on the other hand, taxes would be deducted from the principal before you can earn any interest.
Schwarz advised you to retain a lawyer in Maine to ensure that you are properly protected. You need proper documentation of the loan to see that you have a valid lien. Also, Schwarz said, you should require a down payment that is large enough to cover your costs and wear and tear on the property during the life of the loan. This will protect your interests.
You would set the terms of the mortgage according to the circumstances in Maine at the time the cabin is sold.
Beware `cold calls'
Q. I started a small-amount investment in the stock market in August 1992. I opened an account with the vice president of an out-of-town brokerage firm, starting with $7,000.
After he had two trades, he put the entire amount into a stock HOSE on Oct. 21 and Nov. 5, 1992. The symbol was HOSEE. Normally stock symbols consist of four letters, and only stocks subjected to special conditions have an extra letter.
Actually this company had been damaged badly by Hurricane Hugo when he bought this stock for me. Very soon, the company was under Chapter 11 and then bankrupt. As a result, I lost all my money.
I believe this was not a normal trade. I think that he just simply dumped his dead stocks over my head. I did an on-line check on the computer, and there was no active trading of HOSE during this period.
Is there anything I can do to get my money? Do I have a case? Can you introduce anyone who is willing to help me?
A: The National Association of Securities Dealers operates an arbitration service for people who believe that they have been wronged by their brokers. Douglas F. Parrillo, spokesman for NASD, said the hearing would be held in the closest region, which for Roanoke residents would probably be Washington. You would not need a lawyer, although you have the option of retaining counsel.
You should write or call the NASD for a form to request a hearing. Your letter should be addressed to Deborah Masucci, vice president-arbitration, NASD Financial Center, 33 Whitehall St., New York, N.Y., 10004. Or you can request an arbitration form by calling 212-480-4881.
You can also complain to the State Corporation Commission of the state in which the brokerage house is located. If the brokerage is in Virginia, write to the Securities Division, State Corporation Commission, P.O. Box 1197, Richmond, Va. 23209. The comission might punish the broker, but it would be less effective than NASD in getting your money back.
As a general rule, people should deal with stockbrokers in their own community. A local broker must value his reputation in the community, so he has a stake in handling your account to the best of his or her ability. People should especially avoid dealing with a professional who makes "cold calls" from other cities soliciting business from strangers.
by CNB