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Cedar Rapids Gazette (Newspaper) - November 19, 1974, Cedar Rapids, Iowa SIM SHULSKY The Investor's Guide lly Sam Shulsky With yeiir-ond tax iiucoimlliiK limit approaching and wllli increased income luxes proposed, it is only natural, I sup- pose, that inquiries (in tax-exempt bunds should pick up. A good deal has appeared here lately on this subject, especially in an attempt tu point out to unsophisticated investors that municipal bonds should be considered only in conjunction with one's tax bracket and that their desirability increases only as one's tax bracket rises. In low tax brackets, they are not attractive at all. A table just issued by the municipal bond house of Lebenthal and Co. points ou! that if you are in the 22 percent federal in- come tax bracket that is, would pay as much as 22 percent income tax on the highest portion of your earnings, which is what you would do if you had to 0011 of taxable (not gross) income it would not pay you to buy, for example, a 7 percent tax-exempt instead of a II) percent taxable bond. I3ut once you go above that level 1100 to of taxable income and up) the advantage in 'the lax-exempts increases. Of course, some states and some cit- ies have, in addition, their own ipcome tax levies. Since tax-exempts, in most cases not all are also exempt from stale and city income taxes, investors must of course take these additional taxes inlo Iheir accounting. There is no substitute for doing some tax arithmetic. So make sure that Ihe rate of income taxes you pay federal, stale, local reduces the net yield on taxable bonds to below what you can obtain from tax-exempts. The old ad- age of "don't cut off your nose to spite your face" applies 100 percent in deciding whether an investor should go into tax- exempts for his bond income. Q Recently, I received a growth mutual fund pros- pectus and sent along for investment. Now I'm worried because. I'm lold, the fund has no long history. I'm 81 and have to finance my own expenses. A The fund docs have a long history and a pretty good one. But what mystifies me is why a woman of 81 is worrying about growth! If you must finance your living expenses, why isn't 95 percent of your money invested in treasury bonds or AAA corporates instead of in two or three mutual funds as you indicate in your letter? The funds have fair to good growth records over the last 10 to 20 years. But I repeal why are you investing for a low current return in hopes of growth in the future? And if you tell me that you are going through all this tor- ment just so you can leave a bigger estate for your grandchil- dren don't expect a civil answer. Q Why would a utility company have one class of preferred labeled "B" and another A Because the shares were issued at different limes. Q I bought worth of a high coupon tax-exempt bond issued to build a speedway. They have now defaulted on their interest. My broker seems to think this is temporary. What are my chances? A I have no way of knowing how lolls collected on this road are holding up, what with Ihe higher price of gasoline. You might try In gel in touch with the authority which issued the bond. When you go for high coupon revenue tax-exempts you al- ways lake Ihe risk (hat the project for which (he bonds were issued will not earn enough to maintain service on the.bonds. That's why I generally lean toward "full faith and credit, general obligation" types of tax-exempts. The Od.ir Kaplds Tucs.. Nov. 19, 1971 Mr, Shulskv welcomes wrltlen ouosllons. but tie swcrs only Ihrouoh Ihe column. For information on ret ulonnlno. pleosc Include o selt-oddrcssed. stamped i auests to Sum Shulskv. core ot The Gazette. I be able lo provide on- AMERICAN BLENDED Smooth as Silk Messier Now the third largest selling American whiskey. nis co. DwsmcrnuRG. im BIIMKDMISIW, K PW. iw% HMN HUTU ism. Wrap with enough Place in corrugated When you send someone a. present, you want them to receive it looking like a present. So they'll know you not only cared enough to take the trouble to pick out a gift. You also cared enough to make sure it arrived in the condition a gift should arrive. Follow these steps: 1. First; make sure whatever you're mailing is well-cushioned so nothing is loose inside. (Yesterday's newspaper makes a good padding.) 2. Even if your gift is in a gift box; put it inside a sturdy corrugated box. (Make sure this is well-cushioned; too. More newspaper will do that.) 3- Put a slip of paper with the full address and your return 'address inside the corrugated box. Seal with tape and tie with twine. (That address inside the box is worth remembering because if the outside becomes unreadable, the Post Office will still know where to deliver the package.) 4. Write or print the destination address and your return address (both with Zip Codes) on the 'side of the package you put the postage. In a real hurry? When you need to send your gift in a real hurry, then send it Priority Mail Parcel Post by air. That will get it any- where in the country in just 2 or 3 days. And if the gift is valu- able, be sure to have it insured. You'll find that when you take a few minutes to wrap it securely, your gift should get where it's going still looking the way it did when you bought it at the store. Seal with tape and tie with twine. Address on one side only. Postmaster, Cedar Rapids, Iowa
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