Q: Everyone keeps saying that we’re in a credit crunch. How does that affect the average person? Will I be able to get a loan if I need one?
A: The credit crunch and its affect on the economy are hot topics. Basically, lenders are either financially unable to lend or less willing to because they can’t later resell the loan. For the economy, this means lower investment outlays, less spending, business failures, a devalued stock market, and possibly recession. It particularly affects small businesses relying on credit to stock shelves, purchase equipment, or make payroll. For the average person, it means declining investments and delaying buying a house or car, going to college, or retirement. It could also mean layoffs, foreclosure, and bankruptcy.
If you need a loan be sure to remember the three C’s - credit, capacity and collateral. Be sure that you take action to ensure your credit score is as good as it can be and that you have the capacity to repay the loan as well as collateral available. Also, it will help if you deal with a sound bank where you have a good relationship. For those with sketchy or no credit history it will be much tougher then before.
Q: The current market is too volatile for me right now so I sold some shares of stock. How do I calculate my gains and losses on stocks that split?
A: Many investors are deciding to reduce their stock holdings instead of riding out the market. When it’s time to file your tax return you must calculate the gain or loss on each stock sale. Generally, gain or loss is the sale price less your cost basis in the stock. However, when a stock splits the basis of the old shares must be allocated to the old and new shares by dividing the old stock’s basis by the new total number of shares. This gives you a new basis per share. If you purchased the original shares at various times for differing amounts, the old stock’s basis must be allocated to the old and new shares on a lot by lot basis. Multiply the new basis per share by the number of shares you sold and compare this amount to the amount you received from the sale to determine your gain or loss.
Q: I am saving for my son’s college education and am thinking about contributing to an Ohio 529 plan. What if he doesn’t go to an Ohio college or to college at all?
A: If you are starting to save for college a 529 plan is a good way to go. The earnings grow tax-free and, depending on the state, you can choose from many investment options. Also, if you live in Ohio and choose an Ohio 529 your contribution is deductible up to $2,000 each year. While it’s possible that your child will decide to do something other than go to college or attend college in a different state, choosing a 529 plan is still a good move. If your child doesn’t go to college you can change beneficiaries to another family member or yourself, withdraw the assets, or leave the contributions in the account. If your child decides to go to a college outside Ohio, the Ohio 529 plan funds may be used to pay for qualified higher education expenses at any higher educational institution eligible to participate in U.S. Department of Education student aid programs. Either way you’re covered.
Crystal Faulker is a C.P.A. with Cooney, Faulkner, and Stevens, LLC - Certified Public Accountants | Business Advisors.
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