Personal Finance Q & A
NEW YORK — Homeowners must keep on tracking key expenses Q: Ever since the US government in 1997 began excluding from taxes the first $500,000 in gains from the sale of a home for married couples and $250,000 for singles, I've stopped keeping records of expenses that would affect our cost basis. Is keeping records still important? - R.O., San Antonio, Texas
A: "Yes, but probably not for tax purposes," says Ed Slott, of accounting firm E. Slott & Co., in Rockville Centre, N.Y.
He suggests you keep records for reasons such as proof of work done in case there are legal problems with the contractor, or for insurance purposes in case you have to seek storm damages.
Q: How does one select a financial adviser, and assess their credentials? - J.B., Chicago
A: To get lists of financial planners, contact these organizations: Institute of Certified Financial Planners, 800-282-PLAN; International Association for Financial Planning, 888-806-PLAN; National Association of Personal Financial Advisors, 888-FEE-ONLY.
David Caruso, author of "Let's Talk Money," suggests you look for planners with a CFP (Certified Financial Planner) designation, since they have must pass a comprehensive examination. Always ask for references and check them out yourself.
Q: What are the tax consequences if a company that offers a dividend reinvestment plan (DRIP) lets shareholders reinvest shares at a special discount? Are discounts considered income to the shareholder? - M.W., New York
A: Yes, according to the Ernst & Young Tax Guide 1999, discounts on shares are treated just like cash dividends, as annual income to the shareholder. This would also apply to other benefits bestowed by the company, such as if they pay for brokerage costs.
The DRIP company lists the value of benefits paid to you, including the value of your full dividends, on Form 1099, which is mailed to shareholders at the end of each year.
Although you will pay a tax on these dividends (and benefits), you can add them back into the cost of the stock when determining your cost-basis used to offset capital gains.
Questions about finances? Write: Guy Halverson The Christian Science Monitor 500 Fifth Ave., Suite 1845 New York, NY 10110 E-mail: firstname.lastname@example.org
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