Jewish World Review Jan. 25, 2000 /18 Shevat, 5760
Will splitting stocks affect rollover?
DEAR BRUCE: I have stock in a 401(k), and I am rolling it into a new 401(k) in which the stock is about to split. My question is, do I do it before or after the split? -- B.B. (e-mail)
DEAR B.B.: I don't think that it makes any difference. Just because a stock splits doesn't mean that the price will be affected immediately. If the stock is worth $100 and splits two for one, you'll have two $50 shares.
If you would feel more comfortable getting in where you would "benefit" from the split, so be it. But as far as any long-term effect, I don't see any either way.
DEAR BRUCE: In a recent column you said that you were quite unhappy with an investor who had $40,000 in a 4-percent savings account. You indicated that you can get at least 2-1/2 times that with only a little risk.
I recently retired from teaching and sold my home, and I am going to purchase a new home in my new location. I have $350,000 in a money-market mutual fund to use for this project. What suggestions can you make? -- M.A. (e-mail)
DEAR M.A.: Understand that when we talk about percentages, we use them as a common denominator. Any investment that earns 10 percent or more in interest has to be considered on the risky side, given the current state of the market.
I am more concerned with growth than I am with translating the growth back into interest to have this common denominator. For example, many of the major corporations in this country for the past year have shown growth from 12 percent to 20 percent. In order to "cash out," a portion of the securities will have to be sold. The investment then yields this kind of percentage when the growth is translated into percentage for common language. This is what I am referring too.
DEAR BRUCE: I know the laws regarding gifts of $10,000 to one person in one year. But you refer to claiming a larger gift against your lifetime exemption. I am not as clear as to what a lifetime exemption is. -- C.M. Las Vegas, Nev.
DEAR C.M.: Each person has a $650,000 lifetime exemption (it is being increased to $1 million in the next few years.) You can either use this after you die or claim against it during your lifetime to transfer the money from one person to another without taxation. You need not claim it for the first $10,000 to each person that you wish to give per year. For example if you gave $50,000 to your daughter, you would then be obliged to pay a gift tax on $40,000 or reduce your lifetime exemption by $40,000. There are appropriate IRS forms that can help you accomplish
Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).
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