Cedar Rapids Gazette (Newspaper) - November 19, 1974, Cedar Rapids, Iowa
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;* J* sr , r -w ■■yyr'w-I he Investor's Guide
By Sam Shulsky
With year-cnd (av accounting time approaching and with increased income taxes proposed, it is only natural, I suppose, that inquiries on tax-exempt bonds should pick up A good deal has appeared here lately on this subject, especially in an attempt to 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 out that if you are in the 22 percent federal income tax bracket — that is, would pay as
much as 22 percent income tax on the highest portion of your earnings, which is what you woyld do if you had $3,000 to $12,-000 of taxable (not gross) income — it would not pay you to buy, for example, a 7 percent tax-exempt instead of a IO percent taxable bond
But once you go above that level ($12.-OOO to $10.IMM) of taxable income — and up) the advantage in the tax-exempts increases Of course, some states —• and some cities — have, in addition, their own income tax levies. Since tax-exempts, in most cases — not all — are also exempt from state and city income taxes, investors must of course take these additional taxes into their accounting There is no substitute for doing some tax arithmetic.
So make sure that the rate of income taxes you pay — federal, state, local — reduces the net yield on taxable bonds to below what you can obtain from tax-exempts. The old adage of “don’t cut off your nose to spite your face” applies UM) percent in deciding whether an investor should go into tax-exempts for his bond income.
Q — Recently, I received a growth mutual fund prospectus and sent along $2,000 for investment. Now I'm worried because. I’m told, the fund has no long history. I’m SI and have to finance my own expenses
A — The fund does have a long history — and a pretty good one.
But what mystifies me is why a woman of HI is worrying about growth! lf you must finance your living expenses, why isn t Ha 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 ll) to 21) years But — I repeat — why are you investing for a low current return in hopes of growth in the future0
And if you tell me that you are going through all this torment just so you can leave a bigger estate for your grandchildren 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 times.
The Cedar Rapids (gazette Tues., Nov lf, 1J74
. If it’s worth 3 weeks
to pick out that gift, it’s worth
3 minutes to wrap it right.
Q — I bought $10.0(10 worth of a high coupon tax-exempt
bond issued to build a speedway. They have now defaulted on their interest. My broker seems to think this is temporary What are my chances0
A — I have no way of knowing how tolls collected on this
road are holding up. what with the higher price of gasoline You might try to get in touch with the authority which issued the bond.
When you go for high coupon revenue tax-exempts you always take the risk that the project for which the bonds were issued will not earn enough to maintain service on the bonds. That’s why I generally lean toward “full faith and credit, general obligation” types of tax-exempts
Mu SSuiiky welcomes written questions, but he ahi be able to provide on s*er$ only through the column For information on retirement and pre retirement planning please include a sett addressed stamped envelope Address vour re guests to Sam Shulsky* core of The Gazette
Smooth as Silk Kessler
Now the third largest selling American whiskey.
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:
I. J. Seda
Postmaster, Cedar Rapids, Iowa
Wrap with enough padding to prevent damage.
Place in corrugated box.
Everything our label says our whiskey says smoother.
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Address on one side
Copyright 1974 U S Cum .ii Service
Seal with tape and tie with twine.
1. First, make sure whatever you’re mailing is well-cushioned so nothing is loose inside. (Yesterday's newspaper makes a
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 —that’s Parcel Post by air. That will get it anywhere in the country in just 2 or 3 days. And if the gift is valuable, 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.
JULIUS KSSIW CO UIWRlMCfBURG 'NO BUMM MHW 96 PROOf 72H% SMM Militia. WTS