Marshal Auctions Drug Raid Property

QUESTION: Can you give me the address of the local U.S. Drug Enforcement Administration office? I would like to bid on personal property seized from drug dealers and then auctioned off to the public.--H. F.

ANSWER: The U.S. Marshal’s Office--not the Drug Enforcement Administration--auctions all property seized by the DEA.

In Los Angeles, the Marshal’s Office conducts its sales at noon on the second Thursday of every month at the U.S. Marshal’s Warehouse, 5600 Rickenbacker Road, Building A-3, in Bell.

All merchandise is sold in an “as is” condition to the highest bidder. Only cash or cashier’s checks payable to the U.S. Marshal’s Office are accepted. Vehicles scheduled for auction may be viewed an hour before the bidding begins. For more information, call (213) 894-2495.

Q: Despite your explanation several weeks ago, I still don’t understand how to buy a Treasury bill directly from the government and am afraid to proceed. Exactly how much money do I send? I know these bills are sold at discount, which makes the exact amount of money you are supposed to send impossible to determine in advance. Will they refund your money if you send too much?--E. B.

A: Yes, the amount of the discount is reimbursed when the purchase is completed. Checks for the amount of the discount typically are sent within a week of the auction.

For example, at the Treasury auction held Jan. 3, a three-month bill carried an interest rate of 8.24%, which meant that a buyer actually paid $9,791.70 for a $10,000 T-bill. A mail-order buyer who had sent a check for $10,000 to the Federal Reserve Bank received a refund check for $208.30 along with the verification of the sale.

Treasury bills are sold in 3-month, 6-month and 12-month maturities and are available in $5,000 increments from a minimum of $10,000 up to a maximum of $1 million. You may buy these directly from the Federal Reserve Branch on South Grand Avenue every Monday, or by mail. To order T-bills by mail, send a cashier’s check, made out to the Federal Reserve Bank, to your closest Federal Reserve branch for the face amount of the bill you want to purchase.

For Southern California residents, the best address to use is P.O. Box 2077, Terminal Annex, Los Angeles, Calif. 90051. The Federal Reserve recommends that you use certified mail to send your check; you should mail your order early enough that it will arrive at least one day before the auction.

Q: My father died a month after selling his house and depositing a check for about $150,000 in his account. I am his only heir and am unsure what my tax responsibilities are. Should I prepare a tax form for him and file it by April 15? Can I invoke the one-time exclusion of $125,000 in real estate profits on my father’s behalf? Do all the proceeds from the sale go into the probating of his estate? Am I correct in assuming that, because his total estate is worth less than $600,000, no federal estate taxes are owed?--R. S.

A: Yes, you should file a tax form for your deceased father before April 15. Because your father died after selling his house, you should report that sale and include the proceeds from the sale along with his other income for the year.

If your father was otherwise eligible to take advantage of the one-time exclusion of $125,000 of his profits from the sale, you may invoke the exemption on his behalf. (Basic eligibility requirements are that your father must have been at least age 55; he must not have used the exemption before and he must have lived in the house at least three of the last five years.) Be sure to file a completed Form 2119 with your tax return if you invoke the exclusion.

As far as estate taxes are concerned, your assumption is correct. Estates valued at less than $600,000 are exempt from federal estate taxes. However, there is one additional point you should be aware of. Your father’s estate must file an income tax return. This filing is in addition to the return discussed above, which covers only the final tax year of his life. The filing from the estate covers any income generated or received by the estate after his death. This income may not necessarily be taxed, but the estate still must file a return.

The probating of your father’s estate is an entirely separate matter that is governed by state law. In California, unless you were listed as a joint tenant with your father on the title to your father’s house, proceeds from the sale will be included in the total value of the estate.

Q: I intend to retire in a few months and plan to take a lump-sum distribution of the stock I have in my 401(k) and employee stock ownership plans. I am told by an employee benefits counselor that money or stock from both plans can be rolled over into an individual retirement account. Where do I go to do this and how does it work?--J. J.

A: Basically, a rollover IRA account works just like any other IRA account. But you’re better off not combining your rolled-over funds with any of your other IRA accounts because mingling the accounts will limit what you can do with the funds in the future.

Almost any bank or stock brokerage should be able to help you handle the proceeds of both of your pension plans. Explain that you want to roll over these funds or securities or both into an IRA, and ask what types of accounts they offer and what fees, if any, they charge.

You must decide if you want to put your stock into the IRA account or sell it and invest the proceeds. Some banks will not deal with stock; others will charge you a fee if you want to sell it and deposit the proceeds.

If you decide to keep the shares, you are probably better off dealing directly with a stockbroker. Most brokerage houses allow you to open a special IRA account that will contain only the shares rolled over from your company pension and profit-sharing plans. Federal rules allow you to designate that only you will direct the trading in the IRA account. Of course, you are still subject to trading fees levied by the brokerage.

An addendum on individual retirement accounts: Last week’s column did not mention that contributions to IRAs are fully deductible on federal income taxes by anyone not covered by a qualified pension plan, regardless of their income.

For workers covered by pension plans, the deduction is limited according to income, as described in last week’s column. But, in general, the full IRA tax benefit for employees covered by pension plans is given to single workers with annual adjusted gross incomes of less than $25,000 and married couples with a combined adjusted income of less than $40,000.

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.