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TWA, American Airlines stock exchange won't fly
Q. I am holding a few shares of stock in Trans World Airlines. A friend told me that I could trade them in or exchange them for American Airlines stock. If this is true, what would the ratio of exchange be? I also heard that maybe I should hold onto the stock. I would like to know your thinking on this.
A. I am afraid I have bad news for you.
American Airlines will not give you anything for your TWA shares. American acquired the assets of Trans World Airlines but not the company itself. What's left of TWA is in bankruptcy liquidation in Delaware. In the distribution of remaining assets, creditors' claims will take priority over those of common shareholders.
The good news is that if you sell a stock at a loss or if it becomes worthless, you can claim the loss on your investment on your income tax return. TWA was delisted last year and more recently has traded on the Pink Sheets market for a penny a share. Talk to your broker about selling the stock or providing you with a letter stating there is no longer any market for it.
If you have a paper stock certificate, it may be worth holding onto as a potential collectible rather than selling.
For more information, American Airlines suggests writing to Trans World Airlines Inc., shareholder inquiries, 10601 NW Ambassador Drive, Unit F, Kansas City, MO 64153.
Q. I have been buying shares of a company through dividend reinvestment for 25 years. If I wish to sell, would the IRS require a detailed accounting of each quarterly purchase for 25 years? That would take a listing of many pages.
A. You need a detailed accounting to figure out the cost of your shares, but you do not need to mail that information to the IRS.
In the spot where the tax form (Schedule D) asks for the purchase date for your shares, simply write "various." If you sell any shares you held less than one year, report them separately under the section of the form for short-term capital gains and losses.
Even though you don't have to send your records in with your tax return, you do need to keep them in case your return is audited.
Q. I recently read a reference to health insurance premiums being paid with pretax dollars. What are pretax dollars?
A. "Pretax" means the money is excluded from income when calculating how much income tax you owe. The IRS allows companies to set up their payroll system so some deductions are not included in an employee's taxable income as reported to the IRS. The best known of these would be an employee's contributions to a retirement savings plan such as a 401(k). Health insurance premiums and contributions to medical or dependent care spending accounts also can be made pretax.
Q. I have paid premiums for years on a whole life policy that has built up a cash value. When I die, will my beneficiaries receive the face amount of the policy plus the cash value or just the face amount?
A. Most likely your beneficiaries will receive only the face amount. Some types of policies offer the option of a higher payout combining face value and cash value. Expect to pay a higher premium for this option if it is available.
There are ways to tap your cash value while you are alive through loans or withdrawals, but if you take advantage of them, the death benefit for your beneficiaries will be reduced. If you are contemplating this, be sure you understand how the death benefit will be affected.
Online money map
Reader Bob McKnight recommends this Federal Reserve Web site to readers who have an adjustable rate mortgage tied to the weekly average yield on U.S. Treasury securities adjusted to a constant maturity of one year. The site tracks trends back to 1962. He says the information may be helpful if you are trying to decide whether to switch to a fixed-rate mortgage, or you just want to check up on your mortgage company's calculations. If you have a money Web site to recommend, please send me an e-mail.
-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.
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