Family Loans Can Lead To Reunion With Irs

Any time you’re thinking about lending some money to a member of your family, remember your Uncle Sam.

No, he’s not interested in putting up the money. The truth is, he’s already heavily in debt himself.

But the government’s tax authorities have a keen interest in any borrowing deals between private individuals, even those between parents and children, sisters and brothers and other close kin.

So before you go ahead and transfer the money, financial advisers suggest you give the deal some careful planning and set it up in a businesslike way. Otherwise, they say, you could run into problems that might put a heavy strain on your own finances, not to mention your relationship with the borrower.

“Before you pull out your checkbook, be aware of the pitfalls involved when loaning money to family,” says the accounting firm of KPMG Peat Marwick in the current issue of its planning newsletter Financial Independence.

“Structure a family loan just like any other standard loan to avoid scrutiny by the IRS.

“If you loan more than $10,000 to a family member, you could be required by the IRS to show proof that the money was indeed a loan. Otherwise, the loan could be considered a gift and subject to gift tax.

“A written, enforceable note is the best format. The loan document should list the amount you are lending, the interest rate you are charging, the date payment is due and a description of the collateral, if any.”

Beware of well-dressed IPOs

Did Netscape Communication’s impressive debut on the Nasdaq Stock Market this week made you long for an opportunity to invest in an initial public offering?

Professional money managers offer some words of caution. Many IPOs are dogs in bulls’ clothing.

For example, the share prices of PST Vans, a Utah van company, and Global Star Communications, a Bermuda satellite firm - which both went public last winter - tanked on the first day and have since dropped by about 30 percent.

“Generally, I would say IPOs are not a good bet,” said Manish Shah, editor and publisher of the Manhattan-based IPO Maven newsletter.

Between 1970 and 1990, IPOs had average returns of about 5 percent a year, compared to average returns of 12 percent from companies of comparable size that had already been trading, according to a study conducted by University of Iowa finance professor Timothy Loughran.

“My advice would be to avoid an IPO when it becomes a frenzy,” said Loughran.

Credit report addresses

Curious about what’s on your credit report? You can get a free copy if you have been denied credit in the past 60 days. Otherwise, there might be an $8 to $16 fee. To speed your request, be sure to enclose your legal name, address, daytime telephone number, Social Security number, birth date and your signature. Enclose a copy of your credit denial, too. If you think an entry is incorrect or misleading, you can put a 100-word explanation in your report. Here are the national companies that maintain credit records: TRW Consumer Assistance P.O. Box 2350 Chatsworth, Calif. 91313-2350

Equifax Information Service Center P.O. Box 105873 Atlanta, Ga. 30348 (800) 685-1111 information (404) 612-3150 to order by fax (404) 612-3200 to order by Touch-Tone telephone

TransUnion Corp.

P.O. Box 390 Springfield, Pa. 19064-0390 (216) 779-2378 (601) 933-1200 to order by telephone

US West drops TV shopping

US West Inc. has ended its experiment into interactive television shopping because it cost too much and the technology was out of reach.

This week’s decision adds to a string of similar moves by large telephone companies recently, two years after they started many ventures to add video to telephone service. None of the major companies had started making the necessary improvement to phone lines on a broad basis, however.

US West began developing a service called “U S Avenue” in 1993 with several major retailers, including Nordstrom, J.C. Penney Co. and Ford Motor Co., Hallmark and Virgin Records.

The partners wanted to design a shopping mall that could be accessed through TV.

John O’Farrell, president of US West Interactive Services Group, said the technology to create twoway TV and sophisticated production capabilities for shows are years away.