(MONEY Magazine) – Q. My 82-year-old dad is digging himself deep into debt. He owns a small house in California, collects Social Security and has a modest pension. But he spends a lot more than he takes in. For one thing, there's his "hobby"--picking up old machine parts at garage sales and reselling them, usually at a loss. Then he plays lotto to try to make up the shortfall. He's maxed out on several credit cards; to get extra cash, he arranged a reverse mortgage on his house; and he's taken out high-interest personal loans. No, Dad's not mentally incompetent. He even seems to agree when I tell him he has to stop this excessive spending. But he doesn't stop. I'm worried that when his bills finally catch up with him, his creditors will expect me to pay. Are adult children legally responsible for their parents' profligate spending? PAT CARPENTER Bandon, Ore.

A. Children are on the hook when we're talking about the national debt. So be grateful your dad isn't in Congress. As for personal debts, however, the answer is no. Your dad's creditors cannot demand money from you unless you cosigned any of his loans.

If I'm reading between the lines correctly, though, the question you're really asking is: How can I get my dad to stop being so reckless? Here's a suggestion. The American Association of Retired Persons runs a money-management program for low-income seniors in 22 states, including California (for information, call AARP at 800-424-3410). If your father's annual income is less than $18,000, the organization will dispatch a volunteer to offer him financial advice and, perhaps just as important, companionship and emotional support. Says Philip Jones at AARP: "Dad's real problem may be that he's bored and lonely."

If your father's income is too high for the AARP program, you might want to put him in touch with the Consumer Credit Counseling Service (888-775-0377), which can help him get on top of his debts. And Jones suggests you also help him find a few fulfilling activities that may replace the time he currently devotes to his mad spending sprees. A good place to start is the Elder Care Locator (800-677-1116), which lists thousands of local agencies and programs for seniors.

Q. I'm 34 years old, self-employed and thinking of going to graduate school. I've saved $10,000 toward a down payment on the dream house I plan to buy someday. But now I'm afraid the school's financial aid office will expect me to use that money for tuition. Should I protect my nest egg by purchasing a small condo before I apply? LESLIE DONLEY Seattle

A. Don't do it! Oops, I didn't mean to shout. It's just that buying a home you don't really want doesn't make any more sense than marrying someone you don't really love, whatever the financial advantages might be. Anyway, your savings are almost certainly safe. Most schools follow the federal guidelines for student aid, which, for a single, self-employed person your age, exempt the first $14,900 of your assets when calculating your eligibility for grants and loans.

Q. Last fall, I bought Cash for Your Used Clothing, a book that lists values for hundreds of used items, including clothing, sporting goods and furniture. The accountant who publishes the book promises to defend readers who use its valuations if the IRS audits their returns next year. He'll even pay any interest and penalties they might owe if their deductions are disallowed. I must say the book's figures seemed high--$27 for leather sneakers, $65 for a catcher's mitt--but the deal sounded like a no-lose proposition. So I used the book's estimates to claim $400 in charitable deductions on my '96 return. Now I'm panicking. Was the book a scam? Will the accountant really pay if the IRS duns me? Is this guy even an accountant? Help! JIM TEUNAS Appleton, Wis.

A. When I got your e-mail, I immediately placed it in my "I've been scammed" file, which, alas, is a lot fuller than my "I'm checking this out so I won't be scammed" file. Happily, it turns out that Cash for Your Used Clothing is legit. The book is a standard reference for tax preparers. And it is indeed published by an accountant, William Lewis of Lincoln, Neb. His company, Client Valuation Services (800-875-5927), employs several researchers who update the cost estimates each year. Yes, Lewis will defend you and pick up any penalties and interest in case of an audit. (He says no one has called on him to defend deductions since he began publishing the book six years ago.) For an additional $9, he will even cover you for six years--the IRS' statute of limitations on fraud--instead of the one year you get by purchasing the book.

Still, if you take large deductions, you'll need documentation to back them up. For example, if you donate property worth a total of $500 or more, you must list each gift separately on IRS Form 8283. And for contributions of more than $250, you need a receipt from the charity.

Q. About a year ago, I was laid off in a corporate downsizing. I got a large severance package based on my salary and years of service. After paying income taxes, though, my package shrank considerably. Now I hear that thousands of laid-off IBM employees are suing the IRS, claiming that their severance payments should not have been taxed. If they win, can I get a refund? JUDY BOURQUE Hartsdale, N.Y.

A. Probably not. The explanation takes a while, so stay with me. Essentially, the ex-IBMers are arguing that their severance packages should not be considered routine income but rather compensation for the financial damage caused by their dismissal. One basis for that claim: IBM required them to sign an agreement stating that they would not sue the company for firing them. "We contend that IBM's main reason for offering severance was to avoid being sued for personal injury," says James T. McDermott, an attorney representing one group of aggrieved employees. "Therefore the severance is not salary but a settlement for damages." And, under the rules in effect when the packages were issued, such a settlement is not taxable.

The IBM cases, which involve roughly 3,500 people in 43 states, are scheduled to be heard late this year or early next. But similar suits haven't turned out well for plaintiffs. Courts have ruled that severance packages based on a standard formula, rather than negotiated individually, should be treated as regular income. Since your package was part of a companywide early-retirement offer, it would most certainly be considered taxable, says Robert Wood, a San Francisco lawyer who specializes in the tax treatment of damage awards. (By the way, in August of last year the IRS changed its regulations to make it even tougher to avoid taxes on severance pay, but your package was issued while the old rules were still in effect.) In any event, the only way you would be able to pursue your claim would be to bring an expensive, time-consuming lawsuit of your own against the IRS. So it looks like you're stuck with your shrunken package.

Q. People hate the Susan B. Anthony dollar because it's hard to distinguish from a quarter, right? Well, I've got a simple solution. If the U.S. Mint would just drill a hole in the middle of each Anthony coin, no one would mistake it for a quarter--and we'd save a bit of silver besides. I'd suggest this to the Mint myself, but I'm sure all I'd get back is a polite form letter. Why don't you suggest it in your column? Maybe then the Mint will pay attention. RICHARD NAUGLE Roswell, Ga.

A. Popular opinion seems to sway the U.S. Postal Service--how else do you explain the Fat Elvis stamp? But the opinions of people like you and me hold no currency with the Mint. That's not because they're a callous lot over there. Spokesman Mike White likes your idea, and he adds that others have suggested it as well. Problem is, the design of our money is set by law and no member of Congress has suggested a perforated buck. Instead, our legislators are considering minting a gold-colored coin to replace the 716 million Susan B. Anthonys in circulation.

Personally, I'd prefer that Congress eliminate the coin and stick with folding money. Each time a salesclerk or a toll-taker sneaks one of those Susan B.s into my change, I'm reminded that $1 buys only what you used to get for 25[cents] or 50[cents]. It's something like that wistful feeling that comes over me whenever I play Monopoly and buy Baltic Avenue for $60.

Reporter associates: Hagar Scher, Bruce Shenitz and Barbara Solomon

MONEY also answers your financial questions on Cable News Network's Your Money Saturdays at 2:30 p.m. and Sundays at 6:30 a.m. eastern time. Send your question, plus your name, address and phone number, to

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