FDIC insurance question

From the FDIC:

October 3, 2008 All other deposit accounts at FDIC-insured institutions are insured up to at least $250,000 per depositor until December 31,

2009. On January 1, 2010, FDIC deposit insurance for all deposit accounts?except for certain retirement accounts?will return to at least $100,000 per depositor. Insurance coverage for certain retirement accounts, which include all IRA deposit accounts, will remain at $250,000 per depositor.

That says it all. Come 1/1/10 unless Congress changes the law, any interest bearing deposit other than a retirement account, will revert back to $100,000 of insurance.

Therefore, before buying the 10 year CD, I would ask the bank about how it intends to transition on 1/1/10. E.g., Today, if a joint account has maximum coverage and one of the owners dies, there is a six month period where the survivor would still have coverage for joint owners. At the end of the six month period, insurance would revert to the amount for a single owner. Banks allow the survivor to make ownership changes and/or withdraw uninsured amounts without any penalty during the six month transition period.

Alan has confirmed my understanding or suspicion. You must be aware that you can hold money in different banks and obtain the benefit of multiple FDIC limits. You are also probably aware that you and your spouse can hold several accounts at a single bank, with different ownership, and obtain the benefit of multiple FDIC limits. Be advised that if you hold money in a living trust naming "qualified beneficiaries" (as I recall, children, parents, and siblings), you might qualify for multiple FDIC limits. And, unless you have a ton of qualifying beneficiaries, it doesn't matter what their payout is to get the benefit (i.e. a $10 payout designation to a qualified beneficiary gets you a full level of FDIC insurance). There are rules about how the bank must know and document your payable on death account and beneficiaries (I think these rules are more lenient for credit unions).

Anyway, I just pass on for further study.

In article , Gil Faver

Alan wrote: ...

Is there any rule that the new entity has to inform affected customers? W/ the plethora of changes and the 'other things to worry about' I can see where many could certainly never realize they have a potential problem otherwise.

I hadn't heard a single peep on the national media about the $250k limit being temporary. Hardly seems much purpose (as so much of what DC does, unfortunately :( ).

See my addendum to my previous reply to Arthur Kamlet relating to mergers and assumption of CDs.

I do not have a direct answer to your question as to whether any part of Title 12 or its regulations require notification. I've had first hand experience on this issue and the assuming bank did include a notification relating to FDIC insurance as part of its communication to depositors.

And the relevance to taxes is....???

-Mark Bole

I suppose the next question will be, to the extent it's not covered by insurance how much of it can be deducted?

Stu

Would it be a bad debt loss (short term on Schedule D, subject to $3000 net capital loss per year, remaining carried over)?

From a previous thread on uninsured losses at IndyMac:

As part of your deposits in IndyMac were insured, you can not take an ordinary loss (misc. itemized deduction) for the ~$14000.

You have two choices:

1. Take a casualty loss in 2008 based on a reasonable estimate of the loss.
2. Wait until you know the actual amount of the loss and deduct it as a nonbusiness bad debt (Schedule D, Short Term Loss).

Casualty losses are subject to the following: You first deduct $100 from each casualty incurred in the year. Then all casualties are subject to a floor of 10% of AGI. In other words, you only get to deduct the amount (after the $100 adjustment) that exceeds 10% of AGI.

See Pub 547 for more details on casualty losses. See Pub 550 for mored details on nonbusiness bad debts.

In the taxprofessionals group, Kelvin Smith recently posted the following on this subject:

"The depositor has a choice: casualty loss, ordinary loss as

2% miscellaneous deduction, or non-business bad debt, reported on Schedule D. There's a specific section for it in Publication 17 (Chapter 25: Nonbusiness Casualty and Theft Losses, section titled Loss on Deposits), as well as in the instructions for Form 4684 (Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions)."

Bob Sandler

Bob Sandler wrote in news: snipped-for-privacy@4ax.com:

Am I correct to assume that that section does not apply to my recent purchase of Lehman stock at $17 (now worth less than the selling commission), when I thought things couldn't get any worse?

snipped FDIC dialog

Yes, you are. The FDIC thread was for banks' deposits. Yours is a stock loss. You take those losses against capital gains first, then up to $3000 against ordinary income. You then carry forward whatever remains until it's used up. Joe

Ask your broker if he will reduce the commission to make your net proceeds zero. Many will do that.

I have a question. Suppose he sells the stock for $6 but pays a $10 commission. Would he put a $-4 onto the schedule D?

JoeTaxpayer wrote in news:ge20i8$r95$1 @registered.motzarella.org:

Thanks, Joe!