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State Will Send Unclaimed Proceeds

Q: I had held a Southern California Gas Co. bond that was due to mature in May, 1995. However, the bond was redeemed by the company five years early, in October, 1990. I received notice of the redemption but did not act on it. Then I forgot all about it. Now I find that the proceeds have reverted to the state of California. Is it too late for me to seek the face amount of the bond? To whom should I make the claim? The gas company, or the state? --D.L.T.

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A: You should contact the state of California Controller’s Office, Unclaimed Property Unit, for your bond proceeds. You may either write to them at P.O. Box 942850, Sacramento, CA., 94250-5783, or call at (800) 992-4647. You will be asked to present proper identification and evidence of your right to claim the bond proceeds. Assuming all goes well, you will be sent a check for your bond proceeds plus whatever interest they have accumulated (at the rate of 5% per year) while in the state’s unclaimed property coffers.

You may be interested to know that when you did not respond to the bond redemption notice, the trustee handling the matter for the gas company turned your bond proceeds over to the state. Unclaimed property reverts to the state three years after efforts to locate its rightful owner prove unsuccessful. The state then attempts to locate the owners. Be advised that the longer you allow your property to languish unclaimed in the state’s coffers, the more difficult it can be to complete the paperwork and locate the appropriate documents necessary to claim it.

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Fair Market Value Is One Tax Basis for Gift

Q: About three years ago my brother deeded his condominium to my other brother and myself because he was in failing health. The condo was worth about $90,000 at the time and we paid nothing for it. Now we are trying to sell it. What is our tax basis in the condo? --M.C.S.

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A: Gifts made during a person’s lifetime carry the lower of the donor’s adjusted tax basis or the fair market value of the asset at the time the gift was made.

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It is likely that you will be using your brother’s adjusted tax basis in the condo as your tax basis. (Of course that basis may well have changed since you acquired the condo if you have depreciated it as a rental or made permanent improvements to it.)

Non-Tax Sheltered Loss Can Be Written Off

Q: I held stock in a company that is no longer traded because it is out of business. How do I claim the value of my loss? What about the case where the stock is held in an individual retirement account? --B.K.A.

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A: Non-tax sheltered capital losses are written off against any capital gains and up to $3,000 per year of ordinary income. Excess losses may be carried over from one tax year to the next until all are deducted against either capital gains or ordinary income.

Losses in tax sheltered investments, such as an IRA, are not deductible in the same manner. If the loss was suffered on untaxed funds, there is no deduction at all allowed. It makes sense, if you think about it, since you haven’t paid taxes on the money. Why should you be allowed a tax deduction if you lose it?

However, if you suffer a loss on an IRA funded with after-tax money, you might be allowed a deduction. Here’s how it works: Taxpayers must, in essence but not in reality, aggregate all their IRA investments, both pre-tax and after-tax, to determine if their IRA withdrawals will add up to less than the total tax basis of all the accounts. The amount that the accounts are under the total tax basis is your potential deductible loss. But, be warned: A deduction is not allowed until all the accounts, both pre-tax and after-tax, have been fully depleted.

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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 Or send e-mail to carla.lazzareschi@latimes.com


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