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Archive for Monday, February 5, 2001

Business Briefcase

February 5, 2001

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Government
Treasury to stop sales of one-year T-bills

Say goodbye to one-year Treasury bills. The burgeoning federal budget surplus is making them obsolete.

The final auction of the 42-year-old security will take place Feb. 27, Michael Paulus, the Treasury Department's deputy assistant secretary for federal finance, recently announced.

The changes mean lower interest payments on the national debt but also pose a challenge for investors because there is a dwindling supply of Treasury securities, considered the world's safest investment.

Investors who now own maturing one-year bills will have to find other places to park their money.




Tax-smart savings
Parents urged to look at IRAs for college

The Kansas Society of Certified Public Accountants points out that one way parents can boost their college savings is by taking advantage of Education Individual Retirement Accounts.

IRAs offer qualified taxpayers a tax-smart way to save for future college education expenses of their children or other beneficiaries. Earnings in Education IRAs accumulate tax-free and there is no tax on withdrawals if the money is used for qualified education expenses. Unlike some IRAs, though, contributions are not deductible.

Contributions to Education IRAs must be made in cash before your child (or other beneficiary) reaches age 18. You can set up Education IRAs for as many beneficiaries as you choose, so parents who are saving for the higher education costs of more than one child can reap a greater benefit.

However, total contributions per beneficiary cannot exceed $500 in any tax year. It's wise to make sure you don't inadvertently exceed this limit. There's a 6 percent excise tax for contributions that exceed $500 in any given tax year.

Don't forget that Education IRA savings can be used only for qualified higher-education expenses. These include tuition, fees, books, supplies and equipment.

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