Here are a few frequently asked questions from our clients. Do you have a question
for us? E-mail us at taxinfo@yourtaxpros.com  and we'll post it on the Internet.


          I have $5,000 saved for my children, ages 9 and 7, for their future
          education. How do you suggest I invest it?

          Invest in a solid, growth mutual fund for the time frame involved (9 and 11
          years). This investment will allow for the greatest accumulation of funds
          without undue risk. This may be combined with investment in U.S. savings
          bonds. Savings bonds pay interest at a guaranteed minimum rate and the
          rate floats upward should market rates rise. Additionally, interest is state
          tax-free and federal tax is deferred until the bonds are cashed. Under certain
          circumstances, no federal tax applies if the bonds are utilized for college
          education.

          How will I be taxed on the sale of a rental residence?

          First you calculate your gain (if any) by subtracting from net sales proceeds,
          your basis and any improvements made prior to the sale. Depending on the
          method used to depreciate the property, some of the gain may be taxed as
          ordinary income. The balance of the gain will be treated as capital gain
          subject to a top federal tax rate of 28%.

          I am approaching retirement but would like to continue working
          part-time. How much can I earn before losing some or all of my social
          security benefits?

          In 1999, those under 65 can earn $9,600; 65-70, $15,500; and over 70, no
          limit, without any benefit reduction. Above these amounts benefits are
          reduced $1.00 for every $2.00 and $3.00 earned, respectively. These limits
          are adjusted each year for inflation. Congress is currently contemplating
          raising these limits substantially but no action has been taken yet.

          Having been a single mother for the last twenty-two years, I have not had
          the opportunity to save any money. Now that all the children are on their
          own, what is the best way for me to save and accumulate enough money
          for my retirement? I am 41 years old.

          Most of us do not recognize the idea that we must pay ourselves first in
          order to ensure our own financial security. Thus, a practical strategy is to
          treat savings as a "fixed" expense and not as the amount left over after all of
          our other needs are met. Consider utilizing your employer's 401(k) plan to
          set aside savings pre-tax.

          Can probate be avoided through a living trust?

          Yes, but only if titles to the assets have been transferred to the trust. Failure
          to make the title transfers will leave the assets subject to a will and subject
          to the costs and delays of going through a probate. Probate fees are set by
          statute, and are non-negotiable. Also, probate fees are calculated on the
          value of your gross estate. For example, if you have a $200,000 house with
          a $180,000 mortgage, the probate fees are computed on $200,000, and can
          run between 6% to 8%, or $12,000 to $16,000.

          Are the funds distributed to a beneficiary from a retirement plan of a fully
          vested participant who dies before age 59 1/2 subject to a penalty?

          No distribution from a qualified retirement plan received by a beneficiary on
          account of a participant's death will be subject to the ten percent early
          distribution penalty. Additionally, the beneficiary will not be required to pay
          any excise tax on excess distributions received from the qualified plan on
          account of the participant's death. However, the participant's estate may be
          subject to an excise tax (15%) on amounts on all qualified plans, IRA's and
          tax-sheltered annuities in excess of the present value of a $150,000 annuity
          over the actuarial life expectancy of the participant immediately before
          death.

          I have my own business, are there any benefits to hiring my (minor)
          children?

          Assuming your children perform actual services and are paid according to
          the value of their work, there are many benefits. First, you will receive a tax
          deduction for compensation expenses. Second, if your business is a sole-
          proprietorship (or partnership where both partners are the parents),
          payments for the services of your child (under 18) are not subject to social
          security and Medicare taxes. Third, the wages your child receives will be
          considered "earned income" and are not subject to the kiddie tax rules. The
          income will be taxed at your child's lower tax rates. Finally, the wages can
          provide a means to start a savings plan, including deductible IRA
          contributions, that will benefit your child significantly down the road.