Q&A/Whether to borrow for a new car when you can pay cash; a matter of tax identification numbers

New car: to borrow or not Q My husband and I need a new car. If we pay cash for the car we'll have about $10,000 left in our money market account. Would there be any advantage to our paying for the car in installments? Should we take out an auto loan in order to build up our credit record -- we plan to buy a house in 1989.[WS-- M. G.-D.

You could take out a car loan to build up your credit rating, but that's an expensive way to go about it, says Charles Atwell, a financial planner with Waddell & Reed in Kansas City.

As an alternative, he suggests taking out an ordinary one-year bank loan to buy your car. Then, pay off the loan -- early if possible -- with the money you would have used to pay cash for the car. This will cost you far less in interest and will do just as much to establish a good credit rating, Mr. Atwell says.

Using this technique also will give you more debtless years to build up the savings you'll need for that 1989 house purchase.

Another easy way to build up your credit rating, Mr. Atwell suggests, is simply to acquire a bank charge card -- if you qualify. As long as you use this card only for purchases that you can pay off each month, it will add to your credit record and cost you nothing more than the $20 to $30 annual fee. Which tax ID number for trust? Q In January I established a spousal remainder trust for our grandson, who has just finished eighth grade. The trust was funded with investments in Value Line funds. The question has arisen as to whether the grandson's social security number or the trust's identification number, which has been provided by the Internal Revenue Service, should be used as the taxpayer identification number on the investments.

The Value Line people feel this should be the minor's social security number. It has been my understanding that the trust would need to file a 1041 report under its own number, which would indicate that the taxable income earned was being passed through to the beneficiary, with the tax being reported and paid by means of a beneficiary's custodial account.

Can you tell me which number we should use?[WS-- W. J.

Actually, you should use both numbers, says Elizabeth Zack, a trust administrator at State Street Bank & Trust Company in Boston.

For example, she says, let's assume that the trust earns $100 on its investments and that it pays your grandson $80. The trust has to report and pay taxes on the $20 income it earned and kept. Therefore, it has to use its taxpayer identification number for that share.

Your grandson also has to report his share of the trust income, Ms. Zack says, and must file an income tax form under his social security number -- even though his total income from the trust and all other sources for the year may not be enough to require him to pay any taxes.

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