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By HELEN HUNTLEY

© St. Petersburg Times, published May 13, 2001

Make the call: Is AT&T share-exchange offer a good one?

Q. My wife and I received an offer to exchange our shares of AT&T Corp. for AT&T Wireless Group at the rate of one share of AT&T for 1.176 shares of the tracking stock for the wireless group. We are at a loss as to what to do but must decide by May 25. Please give us the good news as well as the bad news on this exchange.

A. The restructuring of AT&T is not simple, and neither is this offer. The "tracking stock" is designed to reflect the financial performance and value of the wireless services business that is now part of AT&T but is soon to become a separate company.

Even if you do not participate in this offer, you will end up owning some stock in AT&T Wireless because shares are scheduled to be distributed to AT&T shareholders next year. If you give up your AT&T shares now, you will miss out on that.

David Burks, an analyst who follows AT&T for Hilliard Lyons in Louisville, Ky., suggests that conservative investors hang on to AT&T but said growth-oriented investors might opt for the wireless stock.

"AT&T Wireless has better long-term business fundamentals than does AT&T as it exists today," he said. "The wireless sector of telecom continues to produce good growth, while AT&T's long-distance business remains in decline."

But AT&T Wireless will not pay dividends any time soon and so far has not generated meaningful profits. Investors who choose the wireless tracking stock also give up their rights to receive future stock distributions from AT&T.

"Shareholders who do not exchange their AT&T stock for AT&T Wireless as part of the offer should own four securities at the end of next year: AT&T, AT&T Wireless, AT&T Broadband and AT&T Consumer," Burks said.

Q. I need to take cash from my non-IRA mutual funds to help finance a business I am starting this year. I am 32 and have a Roth IRA and a small 401(k) plus three taxable funds: Fidelity Worldwide, opened in 1994; Vanguard Index 500, opened in 1999; and T. Rowe Price Science & Technology, opened in 2000. Does it make any difference how long I have had money in these funds when determining which is the best one to cash out?

A. Because you plan to withdraw money from your taxable funds, it makes a difference how long you have owned them and how much they have appreciated (or depreciated). If you have a gain, selling shares you have owned at least a year allows you to take advantage of the long-term capital gains rate. You probably have a loss on your technology fund, but if you sell those shares, you can use the loss to offset gains on one of your other funds.

Money you need to spend in the next three years should be in a money market fund rather than the stock market. But if you plan to leave some of your money invested in stock funds, you probably should go for a broadly diversified fund rather than a fund that specializes in one area of the market.

Q. Earlier this year the IRS announced new rules for calculating the required minimum individual retirement account distributions. Various news articles were somewhat fuzzy on whether this was proposed or in effect and, if in effect, whether it could be used to determine IRA distributions in 2001. Could you shed some light on this issue?

A. The situation is fuzzy, so it is not surprising that the articles struck you that way. Although the rules are not final, the IRS said taxpayers can rely on them now. IRA owners can choose whether to use the new rules or the old ones for distributions for 2001. In 2002, the new rules will apply.

For other types of retirement plans, such as 401(k)s, the situation is fuzzier. Tax publisher CCH Inc. said individual plan documents have to be amended to permit use of the new rules. Contact your plan administrator if you want to use the new rules and are not sure if your plan permits that yet.

Ultimately, the new rules will make life simpler for retirees. The calculations will be easier, beneficiaries can be changed at any time, and in many cases, the required distributions will be less, allowing more money to continue growing tax-deferred.

Online money map

Fidelity Investments introduced Chart Climber, an interactive game (www.fidelity.com/goto/chartclimber), last week. The educational game uses a bull and a bear to to test your knowledge of investment principles.

- 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, or to huntley@sptimes.com by e-mail.

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