Last week’s answer

Headquartered in Manhattan, I’m America’s No. 1 radio network, providing more than 150 news, sports, music, talk and entertainment programs (featuring Charles Osgood, Don Imus, Larry King, Dan Rather, Wolf Blitzer and more). Through my subsidiaries, I provide the radio and television industries with content, including news, sports, weather, traffic, video news services and other information. My SmartRoute Systems manage information centers for state and local departments of transportation, and market traffic and travel content to wireless, Internet, in-vehicle navigation systems and voice-portal customers. I serve more than 7,500 radio stations. Who am I? (Answer: Westwood One)

Know the answer? Send it to us with Foolish Trivia on the top and you’ll be entered into a drawing for a nifty prize! Know the answer? Send it to us with Foolish Trivia on the top and you’ll be entered into a drawing for a nifty prize! The address is Motley Fool, Box 19529, Alexandria, Va. 22320-0529. Send questions for Ask the Fool, Dumbest (or Smartest) Investments (up to 100 words), and your Trivia entries to Fool@fool.com.

A tax-smart way to save for college

Saving for your child’s education can be tricky.

To maximize savings while minimizing taxes, many folks are using Coverdell IRAs (formerly known as Education IRAs) and custodial accounts. There’s also a (relatively) new option you should know about: the 529 Plan.

A 529 Plan allows you to either prepay tuition for qualified colleges or save funds in a tax-free account to be used to pay higher education costs. You can do this for any child in your life  your kid, your grandkid or the kid next door who mows your lawn. (If you’re going back to school, you can even set up a 529 Plan for yourself!)

You don’t necessarily have to live in the state of the plan that you choose, either.

529 Plans allow you to sock away huge sums of money  more than $200,000 in some states  vs. the maximum annual Coverdell IRA contribution of $2,000. Most 529 Plans have no age or income limitations, so higher-bracket taxpayers can participate. Another big advantage is that the person who establishes the account decides when distributions may be taken.

There are no taxes on earnings in a 529 Plan, so you can build a big war chest much faster than if you had to pay taxes on the investment gains and income every year. When the money is used to pay for qualified college expenses, the earnings are federal tax free! (This is true through 2010. Unless Congress extends the current provisions, there could be some taxes on withdrawals beginning in 2011.)

There are some drawbacks to 529 Plans. If the student doesn’t go to college, there may be a 10 percent penalty on the earnings, depending on the circumstances. Additionally, the funds in the 529 Plan account are handled by plan administrators, not by you, which is actually a plus for some folks. Finally, once the money is in the plan, it must stay there  or in another 529 Plan.

Still, 529 Plans are many people’s best bets. Learn more 529 Plans and other college financing topics at www.savingforcollege.com, www.collegeboard.com and www.Fool.com/pf.htm.

Penny for your thoughts

My dad and I wish to invest in a stock with the symbol LAHA. It was trading at 52 cents per share this morning. Can you tell me more about this company and whether it may be a viable long-term investment? Â B.M., via e-mail

First off, understand that at The Motley Fool, rather than manage anyone’s money or tell anyone exactly what to do, we prefer to help people learn more about money so they can make better decisions on their own.

That said, be extra wary of any company whose shares are trading for less than around $5 each. These are risky “penny stocks,” and although they may seem so “cheap” that you can’t imagine them falling in value, that’s very often what they do. A 50-cent stock can easily fall to 5 cents, taking with it some 90 percent of your money.

We recommend avoiding all penny stocks, even though there may be a few worthy companies among them.

If you’re really interested in a company like Lahaina Acquisitions (LAHA), you should do a lot of research on it. At www.freeEdgar.com and http://quotes.fool.com, for example, you’ll be able to look up its recent earnings reports. Look for a strong track record of fiscal health: positive earnings, low debt, strong competitive position, etc. Look over the past few annual reports, too, which should be available from the company.

Can I prepare my tax return online? Is that a good idea? Â T.F., Midfield, Ala.

You sure can, and many people love the convenience. Pop over to www.quicken.com/taxes or www.hrblock.com. You can prepare your return online there, or buy and use the software packages TurboTax or TaxCut. Drop by www.irs.gov for more “e-filing” options.

A prescient move

At my retirement from AT&T in 1985, I had accumulated, through various savings and retirement plans, several hundred shares of the various Bell companies. Over the next few years, these stocks paid respectable dividends and continued to appreciate in value. Through mergers and acquisitions, my holdings were eventually reduced to stock in three companies: AT&T, Lucent Technologies and AirTouch Communications. In January 1999, because of the explosion of companies entering the communications field and the resulting competition, I sold all my shares for a considerable capital gain. I cringed when I had to pay taxes on it, but it was worth it because my wife still thinks I’m an investment genius. Had I retained those stocks, my investment would be worth less than 10 percent of the value I received when I sold them! Â Cecil Fish, via e-mail

The Fool Responds: Great move, Cecil. You understood the industry from working in it, and got out because you were uncomfortable about your holdings’ prospects.