Question:
I have investment property. What does basis mean, and how do I determine the basis of my property?
Answer:
To determine your basis in an asset for purposes of calculating capital gain or loss upon the sale or other disposition of the property, you need to understand two terms–initial basis and adjusted basis.
Often, your initial tax basis equals your cost–what you paid for the asset. For example, if you purchase one share of stock for $10,000, your initial basis in the stock will equal $10,000. However, your initial basis can differ from the cost if you did not purchase an asset, but rather received it as a gift, as an inheritance, or in a tax-free exchange.
It’s also important to understand the concept of adjusted basis. Your initial basis in an asset can increase or decrease over time. For example, if you buy a house for $100,000, your initial basis in the house will be $100,000. If you later improve your home by installing a $5,000 deck, your adjusted basis in the house may be $105,000. You should be aware of which items increase the basis of your asset, and which items decrease the basis of your asset.
To calculate a capital gain or loss, you need to know your adjusted basis in the asset. Essentially, capital gain or loss equals the amount you realize on the sale of your asset minus your adjusted basis in the asset.
Question:
What happens if my Medicare HMO goes out of business?
Answer:
You have several choices:
- Return to the original fee-for-service Medicare plan
- Supplement your fee-for-service Medicare plan with a Medigap policy
- Enroll in another Medicare Advantage managed care plan if one is available in your area
The decision to return to your original fee-for-service Medicare plan is an important one. Make sure you consider your need for Medigap insurance before you disenroll from your HMO. You can disenroll in early October when you receive the final notice from your HMO. This will give you time for your Medigap policy to start on the first day of the next month so you will not have a lapse between plans. A disenrollment form is available from your HMO plan administrator or a Social Security Administration office.
You can stay with your HMO until the end of the year. You then have 63 days after your HMO coverage expires to purchase a Medigap A, B, C, or F plan with guaranteed insurability. This means that the Medigap insurance company cannot turn you down for pre-existing conditions or discriminate in the price of the policy because of your health or claims experience.
Carefully read the information you receive from your HMO, which should explain your options and provide a list of other Medicare Advantage plans available in your area. A disenrollment form is not required if you go to another HMO. If you have questions, call your plan administrator or Social Security Administration office.
Question:
I need to get a new car, I know you say to refinance you house as much as possible. That makes sense to me. Following the same logic do you recommend leasing over buying and why?
Answer:
To begin, leases and loans are two methods you can use to finance an automobile. Leasing finances the use of a vehicle; taking out a loan finances the purchase of a vehicle. Both have advantages and disadvantages.
The key to remember is interest on a home purchase is tax deductible. The interest on a car is not. Additionally, homes go up in value, while cars do not. Generally it pays to own a car unless you are leasing a car for business purposes. In that case, you can generally depreciate the car over the three year lease. You should be able to deduct the lease as a business expense.
When leasing a car, you pay for only a portion of the vehicle’s cost. You pay for the part used during the time of the lease. With a lease, you have the option of not making a down payment. Sales tax only applies to monthly payments, and you pay a factor similar to the interest rate on a loan. You may also pay additional fees and a security deposit that you do not pay when you purchase a vehicle.
The advantages of a lease is that your monthly lease payments are typically lower than monthly loan payments, and that the leasing company, rather than the individual, must bear the risk of the future market value of the vehicle. If you know you are going to get a new car every three or four years, a lease may work for you. The disadvantages are that you do not own the vehicle. You must return it at the end of the lease.
When buying a car, you pay for the entire cost of the vehicle, and it is yours at the end of the payment period. Usually, you are required to make a down payment, pay sales taxes, an interest rate determined by the loan company, and make monthly payments for the loan. Normally, payments begin a month after you sign a contract.
In our opinion, if you want to get the most out of your vehicle ownership, buy the car, keep it in good condition and drive it for around 10 years.
At Henssler Financial, we believe you should Live Ready, and that includes looking at the financial comparisons and your own priorities to determine which method better suits your individual situation. If you have questions regarding your major purchases, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
Disclosures
The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
