ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Monday, January 13, 1997 TAG: 9701150015
SECTION: MONEY PAGE: 6 EDITION: METRO
COLUMN: Money Matters
SOURCE: MAG POFF
Q: How do you end a shared equity agreement?
When I bought my triplex in 1990, my sister and her husband agreed to co-sign the $800,000 mortgage. They didn't put up any money, but in exchange for co-signing, I let them claim the expenses of it as rental property. They didn't take any depreciation, though.
In 1994, I refinanced it, and they didn't need to co-sign. I don't know how to handle it on our taxes. I'd like to claim the house, but I don't know how to explain to the Internal Revenue Service why they don't claim it any more and we do. Can we?
A: A certified public accountant tried to answer your question but gave up. The CPA is not a lawyer, but nevertheless came to think that you have done something illegal. You probably have run afoul of provisions of the tax code and perhaps statutes pertaining to fraud.
You should not make this change that you propose in the way you and your sister report your taxes, at least not without consulting a lawyer or other tax professional.
You should make an appointment with a lawyer or a certified public accountant who specializes in tax work. Discuss the legalities of your situation and the steps, if any, you can take to correct your prior tax returns.
All taxpayers should report their true status to the Internal Revenue Service. By signing your tax return, you acknowledge that the figures you report constitute the true facts.
Pluses, minuses of U.S. Savings Bonds
Q: My husband and I would like to put money aside for our grandsons, ages 13 and 8, and we could use some advice. At one time, U.S. Savings Bonds were a good way to save. This is not a large amount of money, just gifts at Christmas and birthdays.
A: U.S. Savings Bonds have one advantage in that they can be cashed in tax-free if the money is used to pay for tuition (not room and board) at a college. In order to accomplish this, the bonds must be in the name of the parents. But bonds have little potential for growth, and recently they have become more complex and less favorable for the holder.
Mutual funds that invest in stocks are more attractive, because they have potential for growth over the long haul. You should plan to hold on to the fund for at least five years in order to ride out any downturn in the stock market. But you have that amount of time, because your oldest grandson is five years from college.
The funds have another advantage, as well. After a high initial investment, usually about $1,000, you can add to the fund periodically in payments as low as $25.
You should maintain the funds in your name or in the name of the children's parents. The tax advantage of keeping the money in the children's names is very small compared with the disadvantages. You want to be sure the money remains in the control of responsible adults instead of an 18-year-old. And, under the current rules, children are expected to devote a much larger portion of their own assets toward their education than parents are. Having the money in the child's name cuts down the amount of financial aid for which they are eligible when they enter college.
Last reported, inflation stood at 3.3 percent
Q: What is the rate of inflation this year?
A: At the end of November, the annualized rate of inflation for the prior 12 months was 3.3 percent. The Consumer Price Index rose from 153.5 points at the end of December 1995 to 158.6 at the end of November - meaning that goods and services that cost $153.50 at the end of 1995 carried a total price tag of $158.60 at the end of November. Price increases like that in just a year can be devastating for people on a fixed income.
The annual figures should be released by the Bureau of Labor Statistics later this month. You can watch for the report on the business pages of this newspaper.
LENGTH: Medium: 76 linesby CNB