Trade Group Will Provide Mutual Fund Information
QUESTION: Can you give me a list or a source for the names and addresses of mutual funds that specialize in pharmaceutical companies and the health-care industry?
M. R. A.
ANSWER: The best source for the names of mutual funds that specialize in particular industries is the Investment Company Institute, a mutual fund trade group. The institute maintains several lists of specialized mutual funds and is willing to mail one or more of them to our readers at no charge. Please send a self-addressed, stamped envelope to the Investment Co. Institute, 1600 M St. NW, Sixth Floor, Washington, D.C. 20036.
Another possibility for you might be the institute’s Guide to Mutual Funds, a listing of virtually every mutual fund available in the United States. The institute claims that the guide, which includes addresses and telephone numbers for the funds, is the most extensive listing available. However, the guide does not break down the mutual funds by industry group. Send $2.50 to the above address for a copy.
Q: In October, I paid a school tax of $3,083 in order to begin construction of a house. Is this tax deductible against ordinary income for 1988 or merely an added cost of building? This house is to be my principal residence.--R. S.
A: Unfortunately, it’s just another one of the many extra costs you will encounter while building your house. According to our tax advisers and the Internal Revenue Service, the school fees you paid when you got your building permit are simply that: fees. They are not general real estate taxes, which are, of course, deductible on your income tax return.
Nevertheless, you should keep careful records of all such incidental costs and fees and be sure to add them to your total building costs. They are a legitimate component of the cost basis of the house. As your cost basis increases, your taxable gain on the house, when you sell it, drops.
For your information, these school fees are imposed on virtually all new residential and commercial construction in the state under the authority of a law passed in 1986 by the California Legislature. The law permits school districts to levy special fees of up to $1.50 per square foot on all new residential buildings to help pay for new schools. Most school districts have taken full advantage of the law to accommodate the large number of children entering the state’s public school system. You were charged the fees directly because you are building your own home. Subdivision developers pay the fees when they get their building permits and pass along the costs to the buyers of their homes.
Q: Two years ago, I bought shares in a mutual fund under my own name. Recently I changed the name on them to that of a revocable living trust in my name. The mutual fund’s service representative said that what I did constitutes a sale and repurchase, although I was charged nothing for the name change and nothing but the name on my account changed. Is it true that I have to list this as a sale and repurchase when I file my income tax return? -- R. M.
A: According to our tax advisers, your actions do not constitute a sale and repurchase and do not need to be reported to the IRS as such.
Q: My husband died in February, and a few months later my daughter died. For many years prior to his death, my husband had been buying U.S. Savings Bonds for our daughter through a payroll deduction plan. The bonds were listed in my daughter’s name and my husband was the beneficiary in the event of her death. Now I am the sole survivor of our family. Can I cash in these bonds, and if so, how?--M. U. O.
A: You didn’t say as much, but we are going to assume that you are now the sole heir of your daughter’s estate, which includes the savings bonds. As the heir, you are entitled to all the assets in this estate, including the savings bonds. To cash in the bonds, they must first be put in your name. You should ask the executor of your daughter’s estate to apply to the Bureau of the Public Debt to give you title to the bonds. You must provide adequate proof of your inheritance of your daughter’s estate.
A U.S. Treasury Department spokeswoman recommends sending the bureau certified copies of the death certificates for both your daughter and husband. You should also provide a certified copy of your daughter’s will, if any, or other documents showing that you are her sole heir. The bureau can then reissue the bonds in your name, which will give you the right to redeem them. The spokeswoman reminds you that you are liable to pay the taxes on any unpaid interest accumulated by the bonds, whether or not they were in your name when the interest was earned.
You may write the Bureau of the Public Debt in Parkersburg, W.Va. 26102-1328. Good luck.
Q: I will reach 70 1/2 years in 1989 and must begin withdrawals from my individual retirement account. Although I can defer the first withdrawal to as late as April, 1990, I see no benefit in doing this because I would be liable for taxes on two distributions in 1990. However, there could be a benefit in delaying the first withdrawal if I am permitted to make a contribution to my IRA in 1989. May I?--R. B.
A: No. According to our legal advisers, the law is perfectly clear on this. You may not make a contribution to an IRA in the year you turn 70 1/2 or any year thereafter, regardless of when you take the first distribution from your account.
Carla Lazzareschi cannot answer mail individually but will respond in this column to financial questions of general interest. Please do not telephone. Write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, Calif. 90053.
