High Medicare premiums from signing up too late

Q I turned 65 in 1978, but I waited until 1987 to apply for Medicare. From then on, I have had to pay a penalty for not joining Medicare at age 65. My Social Security check is $800.90, less $81.90 for the penalty. That only leaves me $719, which is my only regular income. How long will this penalty last? This does not seem right.

Name withheld, New Port Richey, Fla.

A According to a spokesman for Social Security, you are paying your current Medicare premium. On top of that, you are also paying a prorated amount for those years you did not take out Medicare, but should have, from age 65 on. So your "penalty" is essentially a double payment, says the spokesman.

If you owned private health insurance during the years you did not pay for Medicare, you might be able to recoup some of your "penalty." You will have to present proof to Social Security that you were paying for insurance back then.

If not, the current amount you are paying will continue to be deducted as long as you receive Social Security.

But you may be entitled to financial help from the state of Florida. Contact your state welfare or human services department and ask about the state "pay-in program." They may provide a stipend to help offset your Medicare premium.

Q If one gets a gift of stock, does that mean that the amount originally paid for the stock is not reported as income, but the appreciation in value - like interest on a gift of money in the bank - is?

R.K., via e-mail

A That's correct. If the gift is worth less than $10,000, then both the donor and recipient do not have to report it to the IRS, says Gary Schatsky, an attorney and fee-only financial planner in New York.

But the recipient must pay taxes on dividends. When the stock is sold, he or she must also pay capital-gains taxes based on the stock's cost basis. The cost-basis will be the lower of the original cost of the stock paid by the donor, or the value of the stock on the date when the gift was received.

If the gift is more than $10,000, the donor should file forms with the IRS and check with an attorney before making the gift, Mr. Schatsky 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

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