By Andrew Robbins
CSMS Magazine Staff Writer
When the CSMS editor called and inquired another money article. I thought, “Must be a slow news day. Ha!”
As I search the news I find articles with headlines, “Life Insurance Company May Fail!” and the attached picture is my insurance company. I made insurance payments for thirty-nine years. My policy has a cash surrender value. What happens when a life insurance company declares bankruptcy? I spoke with my wife and we agreed it would be best for us to surrender the policy now rather then be left out in the cold with nothing.
There are taxes on surrendered policies. Does anyone believe income tax will be less next year or in the future years? President Bush has cranked up the money printing press and the new president is faced with a monumental task of paying for Wall Street’s failures.
Let me remind you of recent history. The US Treasury, without consulting Congress, declared financial institutions that purchase other banks could write off the purchased bank’s bad investments in the current year, 2008. This is a monumental change to the tax code and normally would have required months of research and Congressional debate. In 2009 the US Treasury will not collect billions of dollars from banks that obtained taxpayer funds and then purchase competitors. Secretary Paulson changed the tax code and helped his Wall Street friends.
When an income statement reports huge financial loss, that business maybe “cooking” the institution’s books. For example, the allowance for doubtful accounts is often based on many years of historical data. Today we are making history and a swag number that portrays a $5 billion dollar loss may in fact include loans that will be paid in full.
There are acquisition and tax benefits for increasing the allowance for doubtful accounts. The purchasing bank offsets the purchased banks noncollectables against the purchasing bank’s revenue, saving billions of dollars in federal income tax. This example depicts how one captures a $5.1 billion competitor for a mere out of pocket $200 million. The suckers, taxpayers, picked up the $4.9 billion tab.
Today the Dow closed up 552. The S&P broke into new lower ground and could not hold. That was a technical buy signal and many stocks had a minimum $2 spread from their daily low to their close, a day traders dream. Money was made today. Yes, you can make money in a down market.
If you are an investor, consider both gains and losses and what year will you recognize them. One financial advisor suggests carrying losses into 2009. The theory is from here forward. The government will need to increase taxes. Offset your gains with carry forward losses and reduce your future tax liability.
Time for everyone to think about federal taxes and donations. CSMS Magazine does not pay any of the writers. We write to improve the reader’s life. The web site needs an upgrade. If you donate to nonprofit organizations please consider CSMS.
Note: Neither the author nor CSMS Magazine is in the business of providing the public with financial services. Readers are advised to seek financial counseling prior to investing.
Andrew Robbins is the author of “It Took My Breath Away: One Man’s Experience May Save Your Life.” He may be reached by email at: firstname.lastname@example.org