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Effective January
1, 2010, all taxpayers, regardless of income level, will be entitled to the
benefits (often substantial) of Roth IRAs. From the Roth IRA’s inception in 1998
through 2009, high-income taxpayers were generally denied Roth benefits. As a
part of the May 2006 tax law changes, conversions to (but not direct
contributions to) Roth IRAs will be made available to all taxpayers beginning
January 1, 2010. All taxpayers may, after December 31, 2009, choose to pay the
tax on all or any part of their traditional IRAs and convert them to Roth IRAs.
Where in-service distributions are available, some profit-sharing plan savings
can, by rollover, be transferred |
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to Roth IRAs as
well. Those with significant tax-deferred savings in profit-sharing plans might
want to investigate the availability of in-service distributions.
Conversion causes taxes to be paid earlier but results in future income tax
savings and possibly death tax savings. Accordingly, it is a significant and
complex decision. We have written a paper, “To Roth or Not,” that explains the
general benefits of and answers some questions on conversions. Please call our
receptionist if you would like a copy. The paper is also located on our website
at www.cepcpa.com under Resources. |
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For many years we have been privileged to participate in the Louisiana State
University-Shreveport accounting program by furnishing two scholarships for
outstanding students. This year the Cole, Evans & Peterson Junior Scholarship is
held by Megan Doboze, a native of Jacksonville, North Carolina. Megan came to
Shreveport to attend LSU-S where she has been an honor student. Oksana McCord,
who is the recipient of our Senior Scholarship, traveled even further to LSU-S.
A native of Groznyy, Russia, she is the daughter of a Russian Air Force colonel
and a biology teacher. Oksana states that she is eager to start her career – a
fact evidenced by her 21-hour course load. Our community is blessed with having
LSU-S and outstanding students like Megan Doboze and Oksana McCord. |
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Most of us are generally familiar with the insurance protection provided by the
FDIC and the FSLIC for deposits maintained at federally insured banks and
savings and loan institutions. You also may want to understand the protection
for your accounts maintained with securities brokerage houses.
In general, investments held in brokerage accounts are protected by the
Securities Investor Protection Corporation (SIPC) from loss from failure of the
broker/dealer to deliver customer securities. SIPC was created by the Securities
Investor Protection Act of 1970, but is neither a governmental agency nor a
regulatory authority. It is a nonprofit membership corporation funded by its
member broker/dealers. All registered broker/dealers in the United States are
required to be members of SIPC. In addition to insurance provided by SIPC, many
brokerage houses provide additional insurance coverage for amounts in excess of
the SIPC limits.
The SIPC provides insurance protection for each account up to a maximum of
$500,000, of which only $100,000 can be in cash. The SIPC coverage, of course,
is not insurance against decreases in the value of investments, but is
protection in the event that the broker/dealer fails and is not able to deliver
all securities held in the account.
SIPC provides protection to an investor with accounts at more than one brokerage
house with each one being protected up to the $500,000 limitation. An investor
also might have more than one protected account (each protected up
to the $500,000 limitation ) at the same |
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brokerage house if
the customer is acting in a separate capacity with regard to each different
account. Similar to the FDIC coverage, a married couple can have up to
$1,500,000 in coverage with three accounts--his, hers, and joint. Retirement
plans and IRAs are treated as trust accounts, separate and distinct from
individual accounts. The $500,000 protection limitation is applicable to the
total trust regardless of the number of beneficiaries.
SIPC limits protection of cash amounts to $100,000 in each account. The $100,000
cash protection is not in addition to the total protection of $500,000, but is a
limitation on the $500,000 total protection. The cash protection limitation only
applies to cash held by the broker/dealer from the sale of securities or for use
in purchasing securities (shares of money market funds organized as mutual funds
are, for purposes of SIPC insurance, securities and not cash). SIPC protection
covers securities such as notes, stocks, bonds, certificates of deposit, and
money market mutual funds; it does not provide protection for any interest in
commodities such as gold or silver.
Of concern to an investor is the question of how long it would take to settle a
claim should the broker/dealer fail. SIPC states that the time will vary from
case to case; but, according to SIPC, most customers can expect to be paid in
one to three months. Claims are paid based on the value of the securities at the
"value date." Generally, the "value date" is the date on which customer
protection procedures are commenced by SIPC. The amount paid based on the worth
of the securities on the "value date" in all probability would be different from
their value on the date payment is received.
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