Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, November 29, 1993 TAG: 9311260205
SECTION: BUSINESS PAGE: EXTRA-6 EDITION: METRO
SOURCE: mag poff
DATELINE: LENGTH: Medium
My father has a deed of trust on some property and wants to forgive that note. It's worth about $50,000.
A: Any person can give another person up to $10,000 a year without paying gift taxes or filing a gift tax return.
The donor is responsible for filing a return for gifts in excess of $10,000, but the tax need not necessarily be paid at the time of the gift. If no tax is paid, the portion of the gift over $10,000 becomes part of the estate. It is counted toward the $600,000 exclusion for estate tax purposes.
Your father could forgive $10,000 a year for five years without tax consequences. If the property is owned by two people, he could give each of them $10,000 so the lien would be forgiven in three years. If your mother's name is on the deed of trust, each of them could forgive $10,000 a year.
Married couples are able, in this manner, to give married children up to $40,000 a year.
Figuring taxable and tax-free interest
Q: Could you publish a chart comparing tax-free interest rates to taxable interest rates at various levels?
A: The equivalence of taxable vs. tax-free interest depends on your tax bracket. Generally, people must be in a bracket above the 15 percent level for the tax-free rate to be attractive financially.
There is a formula to help you make such a comparison for municipal bonds, which are about the only tax-free investment left to the average investor.
You compute this by dividing the tax-free yield by a number that is 1 minus your tax bracket.
For example, if you are in the 28 percent bracket, the arithmetic is 1 minus 0.28, or 0.72.
If a tax-free bond pays 3 percent, you would divide 3 by 0.72 to find out that you would have to earn at least 4.167 percent in a taxable investment to equal the yield on the tax-free bond.
If you are in the 15 percent bracket, on the other hand, you would divide 3 by 0.85 and discover your equivalent taxable yield would be 3.53 percent, showing why such investments generally are not considered of significant benefit to investors in lower tax brackets.
When you invest money, you should consider the potential risks and other factors, as well as the tax consequences.\ Viva cuts benefits, but offers refund Q: In 1986, I received a brochure from Roanoke Memorial Hospital's Viva Club stating that "as a lifetime member of Viva, you are entitled to an extensive range of benefits and privileges." I joined and paid the $15 lifetime membership fee. Several years later, my husband joined.
Recently we received a letter stating that Viva must adapt to the new era of reform and budget cuts by revising the services that can be offered. One may still belong to Viva and receive some of the benefits (that were of no interest to us to begin with), but we will no longer receive private room discounts or annual screenings. They said they will refund the $15 if you no longer wish to be a member.
Is it legal for Viva to promise attractive benefits for the purpose of getting you interested in joining and then cancel certain benefits at their own discretion whenever they decide it is to their advantage to do so? Is that not a violation of contract? I am not alone is being upset by this action.
A: You probably would be hard-pressed to prove that you had a written contract with Viva for a specific set of services. And it would be even more difficult to prove that you suffered damages, since Viva is willing to refund your total membership fee.
You sent the same letter to the Better Business Bureau. Its response cited Viva's offer of a full refund, adding that "there is no way to force people to do what cannot be done."
Mary Frances Stephanz, executive director of the bureau, said the health care situation is a problem, and changes by the federal government affecting health cannot be controlled. She pointed out that you received benefits, yet the club is offering you the full refund.
Stephanz did agree with you that "lifetime is a term which should never be used," because there are no guarantees in life of a permanent nature. Lifetime guarantees for products might just as well be the lifetime of the product as well as that of the owner.
Carilion Health System, owner of Roanoke Memorial and Community hospitals, said more than $56 million in health care was cut in the federal budget bill, and "pressure for cost control has caused health care providers to review all of their services."
Carilion still provides free screenings at health fairs. For $15, Viva offers a newsletter, insurance claims assistance, seminars, pharmacy discounts, discounted membership at the Roanoke Athletic Club, a walking club, blood pressure checks, photocopying and travel.
by CNB