“ More Clarification on 1031 Exchanges ” ( JofA , Jun.03, page 83) refers several times to “revenue procedure 2002-83.” The article states that the revenue procedure was issued in December 2002. In fact, there is no revenue procedure 2002-83.

There is a revenue ruling 2002-83, issued in November 2002, which the article discusses.

Lynn Krausse, CPA
Professor, Business
Bakersfield College
Bakersfield, California

The Tax Brief “ More Clarification on 1031 Exchanges ” ( JofA , Jun.03, page 83) needs clarification. On November 25, 2002, the Internal Revenue Service released revenue ruling 2002-83 in Internal Revenue Bulletin (IRB) 2002-49. (It can be found in CCH’s Standard Federal Tax Reporter, vol. 19, pp. 78, 199-24 and 78, 199-25, 2002.)

The article misnamed the ruling as a procedure. It had us in the right town, wrong street. Other than that, it was functionally correct.

William Edwards, CPA
Veltri, Edwards & Associates, PA
Englewood Cliffs, New Jersey

Author’s reply: The term “revenue procedure” was inadvertently used. The IRS released Revenue Ruling 2002-83, not Revenue Procedure 2002-83.

Also, the correct term for TAM should be Technical Advice Memorandum 9748006, not Tax Advice Memorandum (page 84).

Ron Raitz, CCIM
Real Estate Exchange Services Inc.
Marietta, Georgia

The article “ How to Tame Health Care Costs ” ( JofA , Aug.03, page 83) failed to mention an important alternative to cost reduction.

Establishing a health care funding plan and using proceeds to offset future expenses is a viable option as well.

Daniel A. Bills, CPA
Director of Finance
Sacramento Suburban Water District
Sacramento, California

The article “ Investment Tax Planning for Retirement ” ( JofA, Aug.03, page 63) contains the following statements: “There are some savings options CPAs should encourage clients to avoid. These include tax-deferred annuities, which usually carry high fees…” and “The high fees associated with nonqualified tax-deferred annuities mean they are seldom the best alternative for clients saving for retirement.”

Tax-deferred annuities are some of the most misunderstood investments available today. A few years ago when the stock market fell quickly, clients came to me during tax season with 1099DIVs from mutual fund investments showing sizable income to be reported. The underlying mutual funds had decreased in value by a significant amount. These taxpayers were paying tax on income at ordinary income tax rates of up to 39.6% on investments that had shrunk by as much in value. These were not happy times.

Had these same taxpayers been invested in those same mutual funds through a tax-deferred annuity, the funds would have shrunk but they would not have had to pay tax on phantom income.

The high fees referred to in the article also provide guaranteed minimums or set points in many products. Illustrations that show the benefit of tax deferral in the investment often offset such high fees. In many cases the high fees are merely 1.5% more than an investment in the same mutual funds outside the deferred instrument.

Many CPAs now have securities and insurance licenses and offer these products to their clients. It is disheartening to see that an article in our professional journal would make two such bold, blanket statements about products we recommend to our clients under the right circumstances. Maybe such an article is how insurance salespeople ended up with the “chartreuse coat, fast-talking” reputation they have had to bear for so many years.

Barbara Jean Raskin, CPA
Gainesville, Florida

I am puzzled. How could the JofA publish “ Real Estate Is Hot…Don’t Get Burned ” ( JofA, Jul.03, page 28) without requiring both the recitation of the various ways a sale could be constructed and their different tax consequences?

Arnold Frank, CPA
Roslyn Heights, New York