DO I REALLY HAVE TO REPAY MY EX-HUSBAND'S BACK TAXES?
(MONEY Magazine) – Q. I divorced four years ago and have two children. In exchange for my giving up any claim to our property (except for personal possessions), my former husband agreed to pay taxes on income he had not declared in 1986 and 1987. (I didn't know about the income when I signed the original tax returns.) He subsequently filed for bankruptcy, and the IRS informed me that I am liable for his taxes. The bill now totals $70,000, and interest charges are making it bigger every day. I appealed the decision but lost, and the IRS put a lien on my property. Can I arrange for installment payments? And if so, can I get the lien off my property? Jeanne A. Toay Sioux Falls, S.D. A. Sadly, there is no hope that you can ditch this debt. Bankruptcy does not end an obligation to the IRS, and if your ex-husband is not solvent but you are, you must pay up. In the googly eyes of the IRS, you are guilty of the same tax naughtiness as your mate unless you can prove that when the return was signed, you were completely unaware of any undeclared income and did not live in a style that reflected that income -- not an easy task. At this point you have three options: 1) pay up in full; 2) meet with your IRS district representative to set up an installment payment plan (alas, you will have to pay the current 7% annual interest rate and a late penalty of 0.5% of the unpaid balance each month -- ouchy-ouch!); 3) make an "offer in compromise" to your rep if you believe that you will never be able to pay off the whole debt. But, no matter what, the lien stays on your property until the debt is paid.
Q. I have a used ticket for a Beatles concert held in Washington, D.C. in 1966. Is it worth anything? Krink Wright Centreville, Va. A. I can't help but note that your 1966 Fab Four ticket cost $5. A few years ago, my husband and son paid $25 each for a Who concert in a New Jersey stadium. No wonder I believe in yesterday. Anyway, to put it bluntly, you don't have a ticket to ride. Carey Wallace, a specialist in pop memorabilia with Christie's auction house in London, says that a ticket like yours would sell for about 10 pounds -- $15 -- but only if it was unused. What you've got ain't worth nothin' to nobody. Ob-la-di, ob-la-da.
Q. In April 1987, I paid off my home mortgage. Recently, when applying for an extension on my home-equity loan, I found out that the mortgage company -- Arvida Mortgage in Philadelphia -- didn't release the lien on my property, so it looks as though I still have a mortgage. Arvida, whose main office was in Boca Raton, Fla., seems to have disappeared. What can I do? Gene M. Cooper Haddonfield, N.J. A. Thanks to the relentless efforts of reporter Barbara Solomon, MONEY has cleared up your problem. Under Pennsylvania law, Arvida was supposed to have sent to you or your local property records office, within 45 days of your final payment, a piece of paper called a satisfaction of mortgage. It would have cleared your deed. Why Arvida didn't do this we will never know, because it merged with Cobb Partners, another Florida company, in 1988. Cobb sold some of the mortgages to Sears Home Mortgage and the rest to Southeast Mortgage Co. Sears has no record of your mortgage, and Southeast went bankrupt in 1991 and came under the control of the Federal Deposit Insurance Corporation. Douglas Duppstadt, head of customer service at the FDIC's Orlando office, says that since Southeast assumed Cobb's and thus Arvida's obligations, the FDIC will see to it that Southeast provides you with your satisfaction if you can supply a copy of your recorded mortgage and proof that the mortgage was paid in full -- the canceled check for the last payment will do. Mail or fax the stuff to him at the FDIC (P.O. Box 725003, Orlando, Fla. 32872; fax 407-858-3730). In a process too lengthy and tedious to describe here, Barbara also located your canceled mortgage check, which should be in your hands by now.
Q. The Securities and Exchange Commission settled with Salomon Bros. last year over charges that the investment house conspired to corner the market in seven-year Treasury notes. Salomon was fined $290 million. Good. That'll teach 'em -- I hope. That's a hunk of change. What exactly became of it all? Ruth A. Unterberg New York City A. Salomon paid $100 million in civil claims and $190 million in fines and civil forfeitures. Salomon's first $100 million went into a fund that earns about 3% and is supervised by the U.S. District Court in New York City. Its administrator will determine who, among the firms and individuals who filed damage claims, will get some of the plunder. As of mid-1993, the fund hadn't paid out a dime. Salomon did say, though, that it intended to settle $54.5 million in claims through the fund. If by 1997 money still remains in the fund, the SEC can leave it there for a year or propose a final settlement to pay off all the claims. After that, any leftover money reverts to the feds as civil penalty payments. Which tidily brings me to the other $190 million. A cool $122 million is for SEC violations of securities laws and $68 million for Justice Department fines. The money goes straight to the U.S. Treasury's general fund and becomes nothing more than a few drops in the budget bucket.
Q. Would you please explain the pros and cons of owning preferred stock? My investments are in common stock, and my golf partners argue with me about this all the time. Walfred Hendrickson Aberdeen, Wash. A. I am impressed with the classiness of your golfing companions. My dad and his golf friends spend most of their nonplaying waking time (about 10 minutes a day) telling tasteless golf jokes that I am sure you have never heard. Anyway, the answer to your question depends on your investment goals. If you think of stocks as a spectrum, common stock is at the exciting end, straight preferred all the way over on the dull end, and something called convertible preferred is in the middle. Common is tops for growth but bottoms for yield (in English: dividends) and for respect. That is, if the company goes bust, common stockholders are the last to get a share of what's left. Straight preferred almost never grows, so think of it as a kind of bond. If you pick right, though, you can wind up with yields that are somewhat higher than those on ordinary income stocks. You'll need a pro to do your choosing: A lot of straight preferreds are overpriced for individuals but make sense as investments for corporations, which get a tax benefit on the dividends. Convertible preferreds are hybrids -- they offer some growth, not as high a yield as the straights, and the option of converting to common at a specified price if you think the common is going to soar. However, most convertible preferreds are callable, so your high returns may not be everlasting. And when buying preferred, you also have to address such knotty questions as whether the dividend justifies the higher price and whether the conversion terms are fair. But if you can take enough time away from your golf game (I know it will be hard) to find the right issues, don't be afraid to take a swing at preferreds.