Procrastination could pay off those for refinancing, investing in stock
By HELEN HUNTLEY
Published March 28, 2004
Falling interest rates and retreating stock prices are giving procrastinators another chance on two financial fronts.
If you gave up on the idea of refinancing your mortgage when interest rates were rising, that turns out not to have been such a bad move. Now that rates have fallen again, you can save even more. Rates on 30-year mortgages now average 5.4 percent, while those on 15-year mortgages average 4.7 percent. Not surprisingly, mortgage applications have surged this month to their highest level since July. Even if you refinanced before, it might pay to do it again.
"We've had people who have refinanced four and five times," said Monica Martines, spokeswoman for Third Federal Savings. However, she acknowledges that serial refinancing is not as practical in Florida as it is in some other states. Floridians have to add the cost of state documentary stamps and intangibles tax to other refinancing fees. That means we really need to do the math, calculating how long it will take to recoup our closing costs through the savings of lower monthly payments.
Falling stock prices are bad news for most investors, but not for those who are sitting on cash. If you have not contributed to an Individual Retirement Account for 2003 or 2004, or if your contribution is stashed in low-yielding money market funds, this could be a buying opportunity.
Stocks have given up this year's gains, which means you can put your money to work at December's prices. While the stock market never gives guarantees, you at least know that you are paying less than you would have in January or February.
And while procrastination is on your mind, don't forget about that income tax return. April 15 is just around the corner.
Q. I know that when you reach 701/2, you must calculate the minimum amount of withdrawal using the balances in all IRA accounts, but you may withdraw the minimum amount from any one of them. I have both a traditional IRA and a tax-deferred 403(b) account from my years as a teacher. Can I combine the total of the IRA and the 403(b) to determine the minimum amount, and then withdraw from the IRA or the 403(b) account? Or do I have to take a proportionate amount from both the IRA and the 403(b)?
You have to take minimum withdrawals from each of them. All your traditional IRAs can be lumped together in doing your calculations, but a 403(b) must be treated separately. If you had a 401(k), it would have to be treated separately as well.
Q. I sold a second home in Spring Hill this year after owning it for 14 years. I made a profit of about $20,000. I built and moved into a much more expensive new home. I used the proceeds from the sale of the old home to finance the new home. I see it as a rollover. Do I have to pay federal taxes on the profit?
Probably. Your gain is tax-free only if this house was your primary residence for at least two of the five years before you sold it and if you did not take a tax-free gain on the sale of another home during the previous two years. The fact that you bought another house is irrelevant. The tax law no longer has a provision for rolling over the gain when you sell a home.
Q. This year I expect to receive payment on a claim from a company I used to deal with that filed for Chapter 11 bankruptcy. The anticipated payout is in the range of 4 to 9 percent of the claim. What are the tax implications of this? Can I claim a loss for the remaining 91 to 96 percent on my 2004 return?
The general rule is that a nonbusiness bad debt is deductible in the year it becomes totally worthless. It is considered a short-term capital loss.
However, the nature of your claim makes a difference. If you gave this company cash, you probably have a deductible debt and the money you receive through the court will be considered return of your own money. However, deductions are not allowed for money that you merely expected to receive, such as unpaid rent, salaries or fees. Since that income was never received and thus never taxed, you would not qualify for a deduction. In fact, under that scenario, the money you do receive from the court would be taxable income.
If a significant sum of money is involved, it could be worthwhile to consult a tax professional.
- 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 huntley@sptimes.com or Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.
