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Jewish World Review Feb. 14, 2000 / 8 Adar I, 5760

Bruce Williams

Bruce Williams
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Shaky partnership buying house -- DEAR BRUCE: My girlfriend and I are planning to buy a house. I earn $60,000 and she earns $75,000. My credit rating stinks due to a bankruptcy a few years ago, but hers is excellent. She will have at least $50,000 from the sale of her current house.

Would it be better to buy the house before we marry, and will my credit ratings affect hers after marriage? -- V.N., Ventura, Calif.

DEAR V.N.: I am not enthusiastic about unmarried couples buying real estate together -- it can lead to some huge complications in the event that one or the other decides to go his or her own way.

Having said that, the likelihood is that she would be better off proceeding on her own. Whether you are married or single, they would only look at her income. With a $75,000 income and a $50,000 down payment, she should be able to handle a house around $225,000. This is just a guideline and it doesn't mean that you have to go out and buy something at that price.

DEAR BRUCE: My husband and I thought that we should cash in an annuity worth about $8,000 and invest it in our Roth IRAs. The annuity is currently getting 5.7 percent interest as opposed to our IRAs, which are earning 13.8 percent. Not bad. I realize that we will have to pay taxes, but we have had the annuity for 12 years, so there will be no penalty from the insurance company. -- K.J., Denver, Colo.

DEAR K.J.: An annuity that is currently earning less than 6 percent is a loser from my perspective. Whether or not the investment inside your Roth IRA is the place to stay is quite another matter -- there are lots of things out there that are doing better than the 14 percent that you report.

I would surely bag the annuity as quickly as I could. You will take the hit with the taxes sooner or later, so you might as well take it now.

DEAR BRUCE: In 1986 I took a job in California. Feeling that I might want to come back eventually, I turned my home into a rental property. I have decided not to return, and now I would like to sell it. I bought it for $68,000, and it is now appraised at $130,000. Being in the 15-percent tax bracket, what will the tax bite be with the depreciation claim and the capital-gains tax? -- N.A., Carmichael, Calif.

DEAR N.A.: There are some variables that you have failed to address. For example, your attorney fees and the cost of selling the house, such as the brokerage fees, are deductible against your gain. Also deductible against the gain are any capital improvements that you made during the 15 years you owned the house. It is very likely that you have depreciated it down to very little value.

You should get all of this information together and drop it in the hands of an accountant who can prepare the appropriate forms that will tell you exactly what your liability will be.

Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).


02/11/00: Protection by residential zoning
02/09/00: Benefiting from a reverse mortgage
02/07/00: Ensure your insurability
02/04/00: Absurd community zoning laws
02/02/00: Money or securities?
02/01/00: Can we KO a custodian?
01/31/00: Why sell a home you love?
01/26/00: Everyone needs a will
01/25/00: Will splitting stocks affect rollover?
01/24/00: Should early retirees contribute to SEP?
01/21/00: Strategies for paying off debt
01/20/00: Is 15-percent growth achievable?
01/19/00: Selling a second home
01/18/00: Running from a time-share
01/14/00: Don't be a spendthrift!
01/13/00: Who gets the house?
01/11/00: It all depends on size of estate
01/06/00: Check references before hiring an advisor
01/04/00: Savings bonds a bad investment
12/31/99: Out of state ain't that great
12/29/99: Warranty rip-offs
12/27/99: Checking up on investment handlers
12/23/99: Options good only when company's strong
12/20/99: Capital gains tax sometimes best
12/17/99: Don't give up your nest egg
12/15/99: Small-claims court no panacea
12/13/99: Termite company not liable for termites?
12/10/99: Services provided must be paid for
12/06/99: How do we minimize house-sale gain?
12/06/99: Maximize your tax shelter!
12/02/99: My neighbor won't maintain even a modicum of civility
12/01/99: Long-distance rentals a bad idea
11/29/99: Mortgage strategy A-OK
11/18/99: Students can work and learn
11/16/99: Value is what will sell
11/11/99: Y2K: No big deal for real estate
11/08/99: Real life is tough luck
11/03/99: The right time to cash a savings bond
11/01/99: Slow road for savings accounts
10/29/99: What do you want from insurance?
10/27/99: You have a right to see your tax forms!
10/25/99: Why own a house at 65?
10/22/99: Online fine, but CDs?
10/20/99: Love, honor -- and separate credit
10/18/99: Find the value of your stocks
10/15/99: Property lien prevents trade
10/13/99: Clear up debt, only then tie the knot
10/11/99: If it ain't broke...
10/04/99: Should I stick with the company IRA?
10/04/99: Get a financial education!
10/01/99: Insurance: Not much one person can do
09/30/99: Lost tickets are lost cash
09/29/99: Trusting only one financial planner
09/27/99: Adult children should help out
09/24/99: Tips for first-time home buyers
09/21/99: Use the rule of 72s!
09/17/99: Legal strategy can be a pain
09/15/99: Teen drivers drive up insurance
09/13/99: Always use an attorney!
09/10/99: Whose taxes are they, anyway?
09/08/99: How do I roll over my 401(k)?
09/03/99: How can I work out my IRS payments?
09/01/99: When your company can't pay you
08/30/99: Beware of shady viatical investments
08/26/99: Landlords vary on security deposits
08/25/99: Educational IRAs must be spent on education
08/23/99: Finding out the value of old stocks
08/20/99: How to get an FHA refund
08/19/99: 100 percent financing is a scam
08/16/99: Will I have to pay a capital gains tax?
08/16/99: Thinking about PMI
08/13/99: Short-term mutual funds a-OK
08/11/99: It's your job to shop around
08/10/99: Sometimes, roots need to be uprooted
08/09/99: 'Pre-approved' doesn't mean a thing
08/06/99: Only you can determine your investments
08/04/99: Bank IRA the lowest-risk option
08/03/99: Reverse mortgages good for the elderly
08/02/99: Get the survey BEFORE you buy the house!
07/28/99: Get a lawyer -- it's worth it!
07/27/99: If it ain't broke...

©1999, NEA