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Re: Bond Funds: taxable income=actual income?

A 1 M I (Subtitle, Chapter, Subchapter, Part) http://www.law.cornell.edu/uscode/text/26/subtitle-A/chapter-1/subchapter-M/part-I An exempt-interest dividend shall be treated by the shareholders for all purposes of this subtitle as an item of interest excludable from gross income under section 103 (...
by skanney
Sat Mar 01, 2014 5:18 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds: taxable income=actual income?
Replies: 27
Views: 1422

Re: Bond Funds: taxable income=actual income?

#cruncher,

a mutual fund will report dividends, capital gains, etc based upon mutual fund taxation (I think section M of the IRC). Publication 550 is for individuals. It is not relevant.
by skanney
Sat Mar 01, 2014 4:06 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds: taxable income=actual income?
Replies: 27
Views: 1422

Re: Bond Funds: taxable income=actual income?

So let's concentrate on NY. A bond fund incorporated in Delaware buys a California state bond at 104. How does NY tax the Delaware corporation on its income from that bond as opposed to all the other bonds that it holds? Is that your question? Not exactly. The fund (Delaware Corporation) should not...
by skanney
Sat Mar 01, 2014 1:16 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds: taxable income=actual income?
Replies: 27
Views: 1422

Re: Bond Funds: taxable income=actual income?

sscritic,

your entire thrust is for federal tax. this question is about out of state municipal bonds for state tax purposes in nys.
by skanney
Fri Feb 28, 2014 10:02 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds: taxable income=actual income?
Replies: 27
Views: 1422

Re: Bond Funds: taxable income=actual income?

If a fund buys a bond at a premium, it distributes the coupon minus the amortization, not the full coupon. I spoke with the etf guys at spdrs. They went back to their tax people and told me that is exactly incorrect. The dividend is precisely the coupon income and they write off the premium as a ca...
by skanney
Fri Feb 28, 2014 8:59 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds: taxable income=actual income?
Replies: 27
Views: 1422

Re: Do you keep diversification within bond investing?

I was a portfolio manager for these types of funds and a risk manager. Diversification by state is essential. But you should be wary of out of state municipal bond tax treatment if you are in NYS. I understand you cannot amortize premiums unless you itemize deductions on the return. This may put you...
by skanney
Fri Feb 28, 2014 8:59 am
 
Forum: Investing - Theory, News & General
Topic: Do you keep diversification within bond investing?
Replies: 13
Views: 1335

Re: Bond Funds: taxable income=actual income?

but my question is really if the fund bought the bond at 104. I was under the impression dividends were strictly the coupon income. but #cruncher seems to be saying no. And this is correct. Funds have to follow the same accounting practices as individuals when they buy and sell bonds, passing throu...
by skanney
Fri Feb 28, 2014 8:43 am
 
Forum: Investing - Theory, News & General
Topic: Bond Funds: taxable income=actual income?
Replies: 27
Views: 1422

Re: Bond Funds: taxable income=actual income?

but my question is really if the fund bought the bond at 104. I was under the impression dividends were strictly the coupon income. but #cruncher seems to be saying no.
by skanney
Thu Feb 27, 2014 10:24 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds: taxable income=actual income?
Replies: 27
Views: 1422

Re: Bond Funds: taxable income=actual income?

From what I am getting, grabiner says the $4 is a reduction in capital gains and #cruncher says it is amortized and not recorded as dividend income. Is that right?
by skanney
Thu Feb 27, 2014 9:24 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds: taxable income=actual income?
Replies: 27
Views: 1422

Re: Bond Funds: taxable income=actual income?

ok, so say if the bond matures in 2 years instead of 1, I get the capital loss of $4 in year 2. If I owned the bond outright, I would get the $4 as premium amortization split between year 1 & 2. So the difference is one of timing only, but I get the complete tax deduction eventually.
by skanney
Thu Feb 27, 2014 9:04 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds: taxable income=actual income?
Replies: 27
Views: 1422

Re: Bond Funds: taxable income=actual income?

When you buy a fund, the fund reports taxes in the same way you would, but based on when the fund bought the bond. If the fund bought the bond with a 4.25% yield at par, and the bond is now at a price of 104, a $104 investment in the fund will pay a $4.25 dividend for a 4.09% distribution yield (an...
by skanney
Thu Feb 27, 2014 8:35 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds: taxable income=actual income?
Replies: 27
Views: 1422

Re: Bond Funds: taxable income=actual income?

ok, so the maturity of a BOND is treated as a sale. This actually forces NY and the IRS to have different systems of taxing bonds. If I amortize the premium, then my basis is lower at the IRS. In the mean time, NYS does not allow premium amortization unless I itemize taxes. So when the bond matures,...
by skanney
Thu Feb 27, 2014 8:26 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds: taxable income=actual income?
Replies: 27
Views: 1422

Bond Funds: taxable income=actual income?

Say I buy an out of state municipal bond fund (I live in NY). Say the underlying bonds have a coupon of 4.25% and a price of 104. Say they mature on average in 1 year and are held to maturity. Although the math is oversimplified, say the yield is 0.25%. At the state level, am I paying tax on the ful...
by skanney
Thu Feb 27, 2014 7:13 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds: taxable income=actual income?
Replies: 27
Views: 1422

Re: using tax deferred accounts to prepare for & in retirem

ok, i'm not a tax expert...i thought the alternative minimum tax was supposed to cover that...but this criticism actually is ancillary to my conclusions. if anything it supports them...
by skanney
Tue Jan 01, 2013 10:30 pm
 
Forum: Personal Finance (Not Investing)
Topic: using tax deferred accounts to prepare for & in retirement
Replies: 6
Views: 566

Re: using tax deferred accounts to prepare for & in retirem

"No clue about this since I don't know what a "longevity annuity" is." a longevity annuity is a contract where you buy an annuity that starts say when you are 85 and you receive payments until you die. you may buy it when you are say 50. the calculation for purchase in a trad ira...
by skanney
Tue Jan 01, 2013 6:33 pm
 
Forum: Personal Finance (Not Investing)
Topic: using tax deferred accounts to prepare for & in retirement
Replies: 6
Views: 566

Re: using tax deferred accounts to prepare for & in retirem

OK, I didn't read all because what I did read didn't make any sense. The wealthy don't pay high taxes. I thought Mitt Romney dispelled that myth a long time ago. I tried to dispel that myth with my two popular threads on not having to pay taxes. Search the forum for them. :) ok, i hadn't really add...
by skanney
Tue Jan 01, 2013 6:23 pm
 
Forum: Personal Finance (Not Investing)
Topic: using tax deferred accounts to prepare for & in retirement
Replies: 6
Views: 566

using tax deferred accounts to prepare for & in retirement

i completed a study of using taxable accounts, traditional ira's roth ira's variable annuities and am finishing up on longevity annuities. i am a finance geek, not a tax expert, so i focused on the math side. ultimately i found a few key points rather than the complex web i was expecting. so i want ...
by skanney
Tue Jan 01, 2013 5:29 pm
 
Forum: Personal Finance (Not Investing)
Topic: using tax deferred accounts to prepare for & in retirement
Replies: 6
Views: 566

Re: longevity annuity

i've had time to look over the bug and complete my model on roth conversions. the bug was if you have a number of years with zero cash flows in a npv(r,values) calculation and you just skip over the cells, the program assumes the years did not occur. you need to put in a zero for each cash flow for ...
by skanney
Tue Jan 01, 2013 7:38 am
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: longevity annuity

"I'm not matching your calculations. $72,028 * 15% = $10,840 1.04^34 = 3.79 So NPV is -$2,847 since the discounting continues in future years it takes over 16 years before the NPV reaches the -$35,000 of paying taxes now. More importantly you are calculating the NPV of a contingent payment (The...
by skanney
Mon Dec 31, 2012 10:01 am
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: longevity annuity

i agree here. but given the tax structure, i am just looking at it from a practical perspective. if you are in the top tax bracket and pay 100k to buy a 72k longevity annuity beginning age 85, you would have to drop down to the 10% tax bracket or below before it would make sense to buy the annuity ...
by skanney
Sun Dec 30, 2012 9:09 pm
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: longevity annuity

I wasn't recommending (or recommending that you not buy) a longevity annuity. I was just pointing out the new rulings and proposed regulations facilitating its use in retirement plans. The Roth conversion is a separate issue. The Roth conversion is generally beneficial for many reasons, which I've ...
by skanney
Sun Dec 30, 2012 7:01 pm
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: longevity annuity

In response to skanney: under the proposed regulations, if you buy a longevity annuity in your traditional IRA for up to the lesser of $100,000 or 25% of the value of the IRA, it won't count in determining the required distributions: https://www.federalregister.gov/articles/2012/02/03/2012-2340/lon...
by skanney
Sun Dec 30, 2012 10:32 am
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: longevity annuity

How about this link https://www.metlife.com/assets/investments/products/annuities/Longevity-income-guarantee.pdf ? Probably. I can't quite tell if that is a product in itself, or whether it is a rider that can only be obtained in conjunction with a variable annuity... or perhaps only in conjunction...
by skanney
Sun Dec 30, 2012 8:41 am
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: longevity annuity

mathematically speaking, the exact irr can be calculated on any stream of cash flows if you know what they are. so if you know the up front cost and all of the individual montly or years payments, the irr will be an exact figure determined by a precise calculation. in a life annuity, the only uncert...
by skanney
Sun Dec 30, 2012 8:21 am
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: longevity annuity

no life insurance. if i am dead i don't need to support myself any longer...different risk...
by skanney
Sat Dec 29, 2012 4:17 pm
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: longevity annuity

i think the credit risk of the insurance company is a serious issue. i do not have much confidence in the state guaranty assn. aig got into trouble thinking they knew more than they did. some insurance companies have jumped into fixed income products with a "synthetic aaa." examples includ...
by skanney
Sat Dec 29, 2012 1:53 pm
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: longevity annuity

as i understand it, if i start a deferred annuity for 10 years and roll it over for another 10, when it comes up for the roll again i can annuitize the payments. this replicates a longevity annuity with a 20 year start period that becomes a life annuity at that time. the question is what do i do at ...
by skanney
Fri Dec 28, 2012 9:13 pm
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: longevity annuity

rick, if i am not mistaken, inflation protection is offered by american general, principal life and probably metlife as a minimum. i do not believe it is offered by integrity life or lincoln... Yes, on Immediate Lifetime Annuities, but Longevity (deferred) Immediate Annuities.....not so much. you m...
by skanney
Fri Dec 28, 2012 3:41 pm
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: longevity annuity

rick,

if i am not mistaken, inflation protection is offered by american general, principal life and probably metlife as a minimum. i do not believe it is offered by integrity life or lincoln...
by skanney
Fri Dec 28, 2012 7:33 am
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: longevity annuity

i think insurance companies can hedge the inflation part with swaps or use TIPs in some fashion. perhaps they buy TIPs, repo the collateral out and take in low quality collateral to pick up some sort of credit spread. there may be alternatives in swaps that run it off balance sheet as well. as a buy...
by skanney
Thu Dec 27, 2012 9:52 pm
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: longevity annuity

has anyone heard of this site? http://incomesolutions.com/HomePage.aspx seems they have institutional pricing for annuities which can save about 5% off retail, they show you how to compare quotes and it is run by some professor...that what it looks like...maybe they give the house odds?
by skanney
Thu Dec 27, 2012 8:15 pm
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

longevity annuity

does anyone know a good place to get a longevity annuity? vanguard does not sell them but i am looking for a low cost version with cpi protection.
by skanney
Thu Dec 27, 2012 5:43 pm
 
Forum: Personal Finance (Not Investing)
Topic: longevity annuity
Replies: 40
Views: 3760

Re: best software for financial planning

I find that tools that focus just on investment returns are less useful since most of the uncertainty I want to evaluate is in savings and expenses, e.g., what if we move to a smaller house. you make a good point. unless you are asset heavy or plan on saving enough to become asset heavy, managing e...
by skanney
Sun Dec 23, 2012 10:34 am
 
Forum: Personal Finance (Not Investing)
Topic: best software for financial planning
Replies: 17
Views: 1970

Re: best software for financial planning

firecalc does not look adequate on its own. does about as much as possible with historical scenarios, but they are very limited, especially if you are young and have a long period. it does not do any sort of simulation to add to the possible outcomes and does not consider how your liabilities might ...
by skanney
Sun Dec 23, 2012 8:16 am
 
Forum: Personal Finance (Not Investing)
Topic: best software for financial planning
Replies: 17
Views: 1970

Re: best software for financial planning

esplanner looks interesting. they have monte carlo simulations using what looks like tips as a proxy for liabilities. they don't have fat tails and using scenario analysis seems doable but awkward. without the fat tails the monte carlo similation is a it limited, but they use 95% instead of 90% so m...
by skanney
Sat Dec 22, 2012 3:47 pm
 
Forum: Personal Finance (Not Investing)
Topic: best software for financial planning
Replies: 17
Views: 1970

Re: best software for financial planning

oh, i didnt see the esplanner one. let me take a look
by skanney
Sat Dec 22, 2012 3:06 pm
 
Forum: Personal Finance (Not Investing)
Topic: best software for financial planning
Replies: 17
Views: 1970

Re: best software for financial planning

analyze now only showed scenario analysis capability. they did not even mention fat tails or any sort of simulation. money tree has goal based and cash flow based approaches. from what i saw of these in naviplan, they really don't target your liabilities and show how your assets move in tandem (or n...
by skanney
Sat Dec 22, 2012 2:55 pm
 
Forum: Personal Finance (Not Investing)
Topic: best software for financial planning
Replies: 17
Views: 1970

Re: best software for financial planning

i've looked at morningstar and naviplan (which uses morningstar). fidelity was no good. the problem with morningstar is their monte carlo for individuals that i could find does not address fat tails in the distribution of returns or really allow for a scenario analysis. they also target terminal wea...
by skanney
Sat Dec 22, 2012 12:51 pm
 
Forum: Personal Finance (Not Investing)
Topic: best software for financial planning
Replies: 17
Views: 1970

Re: best software for financial planning

standard stuff...college planning, spending levels, asset allocation, etc.
by skanney
Fri Dec 21, 2012 10:57 pm
 
Forum: Personal Finance (Not Investing)
Topic: best software for financial planning
Replies: 17
Views: 1970

best software for financial planning

i am looking for the best software to perform a financial plan. i was hoping for something that can do scenario analysis as well as monte carlo simulations and had some measure of asset/liability analysis. does anyone know a good program for that?
by skanney
Fri Dec 21, 2012 2:47 pm
 
Forum: Personal Finance (Not Investing)
Topic: best software for financial planning
Replies: 17
Views: 1970

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