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From: bill@utastro.UUCP (William H. Jefferys)
Newsgroups: net.invest,net.consumers
Subject: Re: (summary) best approach for small savers?
Message-ID: <82@utastro.UUCP>
Date: Tue, 19-Nov-85 10:26:59 EST
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Posted: Tue Nov 19 10:26:59 1985
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Xref: watmath net.invest:874 net.consumers:3425

> 3) If you believe interest rates will not go up very much in the long term,
>    consider zero coupon bonds *bought in a child's name*.  Zeros pay
>    no annual interest rate so are bought at a deep discount.  But taxes
>    must be paid on interest that is not paid, so they should probably
>    be owned in some tax sheltered account (e.g. IRA, children's name, etc.).

But if Reagan's tax bill passes, you can kiss this one goodbye until
your child reaches age 14.  Under that bill, children under 14 will be
taxed *at their parent's rate* on any unearned income from assets given
to them by their parents.  This includes income from trusts
and zeros.  I recently went through all this with my attorney, and there
was an article in FORBES last summer on the situation.

Of course, the tax bill may never become law (more and more likely
every day), but if you are super-cautious (especially if your children
are relatively young) you should be aware of the potential "sting" here.

BTW anyone else can give to the children, only parents are disallowed.
If your own parents are well off, and are considering helping out with
the children's college education, they can give the children zeros and
there won't be a problem.  Forbes recommends, however, that the parents
the parents of the children be kept out of the transaction entirely, and 
in particular, that they *NOT* be made the custodians of the securities.

Bill Jefferys