Don’t Waste Any More Time and Energy on Enron Shares

Question: I understand that I can write off up to $3,000 of stock losses against my ordinary income. However, I also have heard that a person can take an even bigger deduction if he is the victim of theft or fraud. Does this deduction apply to the losses I have had from Enron?

Answer: Now that’s creative thinking. And you can imagine how much the IRS hates creative thinking.

Your best bet is to forget what’s known as the casualty and loss deduction, and write off your Enron shares the conventional way. Because Enron is still, inexplicably, being traded in the over-the-counter market, you can sell the shares you have and follow the usual rules for a stock-loss deduction. These rules require you to offset your losses with any gains before using up to $3,000 of the remaining loss as a deduction against your ordinary income. Any remaining losses can be used in future years, although again you’re limited to $3,000 a year.

You also could wait until the Enron bankruptcy case is finished and take a worthless stock deduction, but there’s no real advantage to waiting. You might as well get rid of your shares and start writing off your losses now.

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Entrust Retirement to Financial Planner

Q: I am in my early 60s and any thoughts of early retirement crashed with the market. I think it’s time to finally get serious about getting some help managing my modest (and growing more modest every day) assets. I’m not sure how to select a financial planner, or even find one who wants to deal with me. I only have about $500,000 in a 403(b) retirement account, IRAs and stocks, and not a lot of planners want to even bother with that small amount. I could use some of your common sense advice, please.

A: It’s sad that $500,000 is considered small potatoes in the financial planning world, but you’re right that many financial planners have higher minimums.

Don’t give up, though. You can find someone to help you.

You can find a lot of information about how to choose a financial planner at www.latimes.com/money. Professional groups such as the Financial Planning Assn. at (800) 282-PLAN and the National Assn. of Personal Financial Advisors at (888) FEE-ONLY can provide you with information and checklists, as well as referrals.

You’ll want someone who has, at a minimum, one of the accepted credentials for financial planning, such as the Certified Financial Planner mark (CFP), the Chartered Financial Consultant (ChFC) designation or the American Institute of Certified Public Accountant’s Personal Financial Specialist (PFS) accreditation.

You’ll need to do your research, interview several candidates and ensure that you’ve found someone with whom you’re comfortable revealing the financial details of your life. You’ll want to be confident that the person is working in your best interest and is upfront about how he or she is compensated (commissions, fees or both).

Once you’ve found someone you like, you’ll need to do even more due diligence. Check the planner’s disciplinary history with state and federal authorities, and with the group that offers the designation the planner claims.

This all takes work on your part, but your retirement is at stake. It’s worth it.

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Hard Work, Honesty Pay Off in the End

Q: I am a retired police officer, age 54, who is fortunate enough not to have to work again thanks to a great pension, some very lucky real estate transactions in the past and old-fashioned penny pinching.

I’m a regular reader of your column, and I particularly like the way you “straighten out” some of these knuckle-heads who write you with some ludicrous schemes for avoiding taxes or bailing out on debts.

There are many of us out here who pay taxes, save money and pay our debts and who see you as a breath of fresh air when it seems we are surrounded by crazy ideas and crazier people. Keep it up!

A: Thanks for the kind words.

It’s human nature to look for the short cut and to be tempted by the get-rich-quick scheme.

It’s much harder work to avoid debt, pay taxes and get rich slowly. But that, as you’ve found, is the path that ultimately pays off in the end.

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Liz Pulliam Weston is a contributor to The Times and a graduate of the personal financial planning certificate program at UC Irvine. Questions can be sent to her at asklizweston@hotmail .com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. She regrets that she cannot respond personally to queries. For past Money Talk questions and answers, visit The Times’ Web site at www.latimes.com/moneytalk.