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Jewish World Review August 3, 1999 /21 Av 5759

Bruce Williams

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Reverse mortgages good for the elderly


http://www.jewishworldreview.com -- DEAR BRUCE: I have an aunt who is 93 and owns her home outright. She is going downhill fast and wants to stay in her home until the end. She has repeatedly stated that she does not want to go into a nursing home. A friend recently told me about an article on reverse mortgages. What can you tell me about reverse mortgages, and where can I apply? -- O.L., Villa Hills, Ky.

DEAR O.L.: Almost any commercial bank should be able to help you. Simply put, the person who mortgages the house receives a monthly check for a portion of the value of the house. When they pass away, the house is then sold to satisfy the obligation. In the case of a 93-year-old, the checks could be substantial and still actuarially not put a strain on the collateral. This would allow your aunt to stay where she is most comfortable until the end of her days. For someone such as your aunt, this makes a great deal of sense.

DEAR BRUCE: Before the capital-gains tax was revised, the seller of a home could deduct the expenses for improvements made on the property against any profits made. However, now the profit from the sale is tax-free up to $250,000. Is it still legitimate to claim these deductions? -- K.A. Topeka, Kan.

DEAR K.A.: Unless your profit exceeds $250,000 per person ($500,000 for a married couple), expenses are not relevant. In the very few circumstances where your profit exceeds $500,000, before the sale is consummated, show the numbers to your attorney. There may be a creative way to set the sale up where your tax impact would be less. Very few homes are sold showing a $500,000 profit.

DEAR BRUCE: I started a small retail computer store a couple of years ago. The only job I had up until that time was as a manager at an HMO. My question concerns inventory. I have lots of things that I will never sell -- parts like mother boards and software -- because the technology has zoomed past them. What is the best thing to do with these items? I am of the opinion that they are over-valued in my inventory, because no one will pay what they were purchased for originally. Should I auction them off, use the parts to build computers to donate to non-profits, use the parts in my business or keep them forever? What can you tell me? -- C.B. Barrigada, Guam

DEAR C.B.: This is a question more properly asked of your accountant. Not taking advantage of the real depreciation -- even down to $0 -- seems to me a mistake. That is an accounting question rather than a practical question. In a business like yours, I suspect this is something you will deal with on a regular basis, due to the rapid acceleration of technology. It is also a wake-up call. You might want to consider keeping as little inventory as you can possibly get away with, particularly in a world where you can get overnight delivery, or two-day at best. While it is more expensive to ship that way, I have a strong suspicion that over the long haul, it would be a lot cheaper than markdowns on surplus inventory.



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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08/02/99: Get the survey BEFORE you buy the house!
07/28/99: Get a lawyer -- it's worth it!
07/27/99: If it ain't broke...

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