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In a sector that soared, some funds still sagged

Q In the Monitor's Jan. 8 issue, a chart indicated real-estate-sector funds had gone up 25.6 percent in 2000. How was this determined? I've had several real-estate funds and one of them has been near the top for years. Last year it rose just 14 percent. Is your figure skewed in some way?

L.T., Holderness, N.H.

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A The 25 percent figure is the average gain for the sector for the year ending Dec. 31, based on the total returns of 153 real estate funds tracked by information firm Lipper Inc. Your fund underperformed the sector.

Q I invest only in top-rated mutual funds. How many four- and five-star funds does Morningstar list?

I.S., Westfield, N.J.

A Of the 8,936 funds tracked by Chicago-based information firm Morningstar, 922 funds hold the highest five-star rating; 2,080 funds have four stars.

Q Three years ago, we befriended a then-27-year-old inmate who will be eligible for parole in 30 years. We are concerned that he not be homeless or on welfare at age 60. Should he file an income-tax return so the IRS has record of him? He works in a corrections program and has never earned enough to file. They insist he receives a "stipend," not wages. So he gets no W-2 form. His stipend for 2000 was $2,892, of which he contributed $1,100 to a Roth IRA.

C.B., Enosburg Falls, Vt.

A "It appears that your friend does not need to file a federal tax return for the year 2000, since his income was below the required minimum gross earnings of $7,200," says Gary Schatsky, a fee-only financial planner and attorney. "That assumes that he is a single person." (If married, but not living with his wife, and having no child, he might be just over the minimum threshold of $2,800 and would need to file.)

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Since the Roth IRA is not tax deductible, (unlike the traditional IRA), he does not need to notify the IRS about his contribution. Incidentally, the provider of the Roth IRA must have interpreted his stipend "as earned income," says Mr. Schatsky, since you have to have wage income to fund an IRA.

Finally, "the IRS knows about your friend, since they would have a record of his Social Security number," he says.

Questions about finances? Write:

Guy Halverson

The Christian Science Monitor

500 Fifth Ave., Suite 1845

New York, NY 10110

E-mail: halversong@csps.com

(c) Copyright 2001. The Christian Science Publishing Society


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