ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, April 29, 1996 TAG: 9604300005
SECTION: MONEY PAGE: 6 EDITION: METRO
COLUMN: Money Matters
SOURCE: MAG POFF
Q: I was a stockholder in the former Dominion Bankshares Corp. of Roanoke. I filed a claim in connection with the stockholder suit which Dominion's successor, First Union Corp., settled for about $5 million. I have heard nothing about my claim since I filed it nearly a year ago. Back in January, you quoted the accountants as saying the claims would be paid by the end of March this year. What is the status of this matter?
A: The status of the pending 3,000 or more claims is a great mystery. Mike Bancroft of the Philadelphia accounting firm handling the claims, who in the past was willing to discuss the status of the claims, did not return near-daily telephone calls made since late March. Nor did the Philadelphia lawyer who pursued these claims, Sam Simon, return phone calls. The Roanoke lawyer who was local counsel for the stockholder, Arthur Strickland, said he has not been informed about the status of settling claims and distributing money. (The amount has been estimated at about $3 million after payment of fees.) On behalf of this column's readers, the Roanoke lawyer also made phone calls to the accounting firm. He was told that the firm could not discuss the situation publicly at this time.
Q: If an investor making $22,000 a year with salary increases of 4 percent a year invests 6 percent of annual salary with 100 percent employer matching at an average annual return of 7.4 percent, what will be the balance of the account after 10 years and after 22 years?
A: James Pearman of Fee-Only Financial Planning in Roanoke put your figures through his number cruncher. He calculated that you will have $45,227.68 after 10 years. Thanks to the miracle of compounding, in which earnings are paid on earnings, the account would swell to $555,500.90 after 22 years.
Q: My husband and I purchased our home and a lot (that was surveyed at the time of purchase) from my father and mother. Several years after that, we had wanted to buy the lots on each side of us, which my Dad gave us.
We are getting ready to build a house. We are now trying to figure out our capital gain, whether we have to include all of the capital gain. Can we sell one house and one lot? What would be the capital gain on that? Can we sell one house and one lot and roll it over into the price of a new house?
A: Harry Schwarz, a certified public accountant with the Roanoke firm of Schwarz & Co., said he assumes that the house in question is your principal residence.
Under the rules of capital gains on a principal residence, he said, you can sell your house and any land surrounding it and defer taxes on the gain. Of course, you must buy or build a new home costing as much or more than the selling price of the old house within two years of the sale.
Schwarz said you must have held the adjacent lot long enough to prove that it is land surrounding the principal residence. You cannot buy it just a few months before selling it with the house, but the tract need not have been purchased at the same time as the house.
You must pay capital gains tax on any lot you sell separately from the house.
Q: I have stocks and bonds that are held by a large brokerage firm with a local office. I have these investments for income purposes, and I am not interested in buying or selling additional stocks or bonds. I am retired.
I have been told that if a brokerage firm that is holding your stocks or bonds were to get into financial difficulty, you could lose your investments. I would appreciate your confirming this information for me.
A: Accounts at most brokerage firms are insured up to $500,000 each against the possibility of fraud or failure at the company. This amount is covered by the Securities Investors Protection Corp., a quasi-governmental agency.
Most reputable brokerage houses, however, are covered up to $2.5 million for each account by private insurance companies. Many of the bigger houses pay premiums to insurance companies for coverage as high as $25 million for their larger accounts. This insurance fund is private, not government-sponsored, and is financed by the brokerage houses. The risk is borne by the insurance company.
The insurance does not protect the principal of your investments. When you buy stocks or bonds, you know that the value can go up or down with the market. This risk is uninsured. But you are protected against fraud or failure of the brokerage house.
LENGTH: Medium: 78 linesby CNB