Sadly, Stockholders in Beverly Hills Savings Are Left Down and Out
QUESTION: I hold 1,000 shares of Beverly Hills Savings & Loan stock. I am wondering what has happened to the value of these shares. The defunct institution was put into receivership by the Federal Home Loan Bank Board and then taken over by Michigan National Corp. Is the stock now worthless, or is Michigan National obligated to purchase my shares?--L. G.
ANSWER: Sadly for you, your 1,000 shares of Beverly Hills Savings & Loan are completely worthless. The institution was put into receivership by the bank board on April 23, 1985. For the next 3 1/2 years, the S&L; was operated as a federal mutual savings and loan, without any stockholders. In December, 1988, Michigan National Corp., which operates Michigan National Bank, took over the institution. Neither transaction made provisions for the shareholders.
However, before you become outraged at the government, remember that it was Beverly Hills S&L;’s severe real estate lending problems that caused government regulators to step in to do their job: protecting both the depositors at Beverly Hills and the Federal Savings and Loan Insurance Corp., which insures S&L; deposits. The owners of the institution, shareholders such as yourself, have little recourse once a thrift is put into receivership. Your original company is now called Beverly Hills Savings Bank and is a wholly owned subsidiary of Michigan National Corp.
Q: I retired from the Post Office in January, 1988, and chose to take my pension, into which I had contributed for almost 40 years, as a lump sum. My distribution check noted that the government had deducted about $3,000 for income taxes. I netted a $25,000 payment. Should I include this amount as income when I file my taxes? Do I get some sort of special rate because this money was taxed once already?--C. L. H.
A: It is possible that you are confused about the contributions to your pension fund. If you check, you will probably find that those contributions were not taxed over the years. So, now that you have drawn out the money, you’re being taxed on it.
For the purposes of completing your income tax form, you should declare the pension fund proceeds as income and indicate on your tax form that $3,000 has already been withheld for federal income taxes.
Another strategy for pension fund disbursements is to roll them over directly into an individual retirement account. If you complete the rollover within 60 days of receiving the distribution, taxes on it are deferred until you withdraw the money from the account. However, it is too late for you to use this maneuver now. Furthermore, this strategy is available only to members of qualified pension plans, as defined in Section 401 of the Internal Revenue Code.
Q: I am an 81-year-old widow with a taxable income of $11,000. I gave my family members gifts last year totaling $15,000 and gave charity groups another $2,700. I also spent $5,000 at the cemetery. Do I have to file a tax return?--R. K.
A: Yes, you probably do. According to the Internal Revenue Code, single taxpayers over age 65 with an annual income of $5,700 or more must file a tax return, regardless of their contributions and other deductions. However, Social Security income is not included in this amount.
In addition, if you are providing support for others in your household, the minimum income requirement for a tax return filing jumps to $7,100, or as much as $7,550 if you are a “qualifying widow,” a designation that goes to those whose spouses died in 1986 or 1987. Even if you owe no taxes, you must still file a return if you fall into the income categories listed above. Furthermore, if any taxes were withheld from your income during the year, and you are entitled to a refund, you must file a tax return to get what you are owed.
For more precise information about your situation, you should consult a qualified expert, such as an accountant. You might also read one of the many tax preparation guides available at bookstores. Another source is Publication 17, published by the Internal Revenue Service. This general tax overview contains a section spelling out filing requirements. You may obtain the pamphlet by calling the IRS at (800) 424-FORM. The IRS also operates a toll-free tax information line: (800) 424-1040.
Q: My husband has been married previously, and in 1987 he sold his house and took advantage of the one-time profit exclusion of $125,000 available to senior citizens. When we married in 1988, I had never taken advantage of my exclusion. I am wondering if I will be eligible to use my exclusion after my husband dies. Can you advise me on this?--L. A. J.
A: Yes, macabre but true: If you become either widowed or divorced, you are again eligible to use your $125,000 exclusion. Basically, the tax law allows everyone over age 55 a one-time exclusion of up to $125,000 in profits from the sale of a house. However, if one spouse has used the exclusion, the other can’t for as long as the marriage lasts.
Because your husband has already invoked his exclusion--even though it was in a previous marriage--you are not able to use yours. Once you are on your own, you are free to use your exemption. We would like to gently advise our readers that using this exemption is probably not worth ending a marriage.
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.
