Saving on Long Distance? Now, There’s a Cause

Q: I recently received a solicitation offering long-distance telephone service, plus the chance to contribute to the democratic process. The company, Working Assets, says a portion of my bill will be donated to liberal political causes. It also offers to help pay if I contact certain government and business leaders on particular issues every month. The company also says its rates are better than the standard rates of other long-distance companies. It all sounds too good to be true. Is it? --M. G .

A: Not necessarily. After a detailed analysis, you could discover that Working Assets does offer competitively priced long-distance rates as well as a chance to support a handful of liberal political action groups.

The San Francisco-based firm, which has signed about 60,000 subscribers in its first 10 months in business, says it donates 1% of all its long-distance charges to such groups as Amnesty International, Planned Parenthood, Greenpeace and the Children’s Defense Fund. (As a bonus, the company says its bills are printed entirely on recycled paper with soy-based ink.)

Politics and the ecology aside, the real questions here are the quality of the company’s service and the competitiveness of its rates. Depending on your phone usage patterns--how often you make long-distance calls, to whom and at what times--the rates offered by Working Assets could be better than the standard charges set by AT&T;, MCI or Sprint.

However, the key here is the word standard. All three of the nation’s largest long-distance carriers have discount calling plans that offer substantial savings--some plans are better deals than others--to customers making more than the average number of long-distance calls. Before making a decision, you should analyze your long-distance bills and compare the rates offered by Working Assets to the special calling packages offered by the Big Three carriers.

How can Working Assets possibly offer better rates? The firm leases its phone lines in bulk from Sprint and resells the access at rates pegged to the non-discounted terms charged by its major rivals.

For consumers with the median amount of long-distance charges per month--less than $10 worth, according to some studies--resellers such as Working Assets can offer competitive service. However, consumer groups say that heavy long-distance users will be better off, financially speaking, subscribing to a special discounted calling plan from one of the Big Three carriers.

Remember, you are always free to make a fully tax-deductible charitable contribution to the political cause of your choice. There is no need to pay higher long-distance charges that are not tax deductible to support your political beliefs when there are ways for you to save on your phone bill and get the charitable contribution tax deduction at the same time.

Deferring Gain on Home Sale Abroad

Q: In a recent column, you said a home purchased in a foreign country would qualify as a replacement house for the purpose of deferring the recognition of a gain on a home sale. Does this also apply in reverse? I am stationed in Japan and will be transferring back to the United States soon. If I buy a home there, may I defer any gain I have on the sale of my house in Japan? -- J . L .

A: Yes. U.S. citizens living abroad are entitled to defer taxes on their home sale gains in a foreign country by purchasing a home of equal or greater value in the United States.

You might also be interested to know that for workers abroad, the replacement period--typically 24 months from the date of the home sale--does not begin running until you return from your overseas assignment.

Social Security ‘Switch’ Cuts Benefit

Q: May my wife retire at age 62 on her own small Social Security and then, at age 65, switch over to the higher, spousal benefits available on my account? I thought I read somewhere that she could. But when we checked with Social Security, we were told no. Are we being given the runaround? -- M. F.

A: No. If a wife begins drawing Social Security at age 62 on her own account, she cannot, at age 65, collect the full 50% of her spouse’s benefit that she would be entitled to if she had waited until age 65 to begin drawing benefits.

How much will she collect? The actual math is a bit complicated, but it will be somewhat less than 50%. It depends on the difference between the benefits the wife would be entitled to draw at age 62 and at age 65.

For example, if a wife would be entitled to $100 per month if she waited until turning age 65 to take her benefits and just $80 per month if she takes them at age 62, then the $20 difference is deducted from the 50% spousal benefits that she would get at age 65. So, if her husband draws $400 per month, spousal benefits would normally be $200 at age 65. But because she started drawing benefits on her own account at age 62, her share is reduced by $20, and she would get just $180.

If you think about it, the reduction makes sense because the government is trying to compensate for the fact that the wife had been drawing benefits for three years before switching to her husband’s account. She had already elected to take $20 per month less when she decided to begin benefits at age 62, so that difference is carried forward.