You can sell Enron, take write-off

Forget about trying to take casualty and loss deduction

May 12, 2002|By Liz Pulliam Weston | Liz Pulliam Weston,SPECIAL TO THE SUN

I understand that I can write off up to $3,000 of stock losses against my ordinary income. However, I also have heard that a person can take an even bigger deduction if he is the victim of theft or fraud. Does this deduction apply to the losses I have had from Enron?

Now that's creative thinking. And you can imagine how much the IRS hates creative thinking.

Your best bet is to forget what's known as the casualty and loss deduction, and write off your Enron shares the conventional way. Because Enron is still, inexplicably, being traded in the over-the-counter market, you can sell the shares you have and follow the usual rules for a stock-loss deduction. These rules require you to offset your losses with any gains before using up to $3,000 of the remaining loss as a deduction against your ordinary income. Any remaining losses can be used in future years, but again you're limited to $3,000 a year.

You also could wait until the Enron bankruptcy case is finished and take a worthless-stock deduction, but there's no real advantage to waiting. You might as well get rid of your shares and start writing off your losses now.

I am in my early 60s and any thoughts of early retirement crashed with the market. I think it's time to finally get serious about getting some help managing my modest (and growing more modest every day) assets. I'm not sure how to select a financial planner, or even find one who wants to deal with me. I only have about $500,000 in a 403(b) retirement account, IRAs and stocks, and not a lot of planners want to even bother with that small amount. I could use some of your common-sense advice, please.

It's sad that $500,000 is considered small potatoes in the financial planning world, but you're right that many financial planners have higher minimums.

Don't give up, though. You can find someone to help you.

Professional groups such as the Financial Planning Association at (800) 282-PLAN and the National Association of Personal Financial Advisors at (888) FEE-ONLY can provide you with information and checklists, as well as referrals.

You'll want someone who has, at a minimum, one of the accepted credentials for financial planning, such as the Certified Financial Planner mark (CFP), the Chartered Financial Consultant (ChFC) designation or the American Institute of Certified Public Accountants Personal Financial Specialist (PFS) accreditation.

You'll need to do your research, interview several candidates and ensure that you've found someone with whom you're comfortable revealing the financial details of your life. You'll want to be confident that the person is working in your best interest and is upfront about how he or she is compensated (commissions, fees or both).

Once you've found someone you like, you'll need to exercise even more due diligence. Check the planner's disciplinary history with state and federal authorities, and with the group that offers the designation the planner claims.

This all takes work on your part, but your retirement is at stake. It's worth it.

Liz Pulliam Weston is a columnist for the Los Angeles Times, a Tribune Publishing newspaper.

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