Don't get paranoid over Social Security number

DEAR BRUCE: You recently wrote about ID theft. Why do all Medicare statements come with my full Social Security number on each page? Couldn't they just use the last four numbers? — R.M., Las Vegas, Nev.

DEAR R.M.: There is an extraordinary amount of paranoia about Social Security numbers. While widely used for identification, it's not the end of the world if one becomes public information. For years, many college IDs were simply students' Social Security numbers, and those records are still floating around.

How would you know whether your Medicare account is appropriately credited if they only provided the last four digits? While it's not wise to be careless with a Social Security number, you're going to have to use the entire number in dealings with the government. In today's electronic world, I don't see any way around that. Don't lose any sleep over it.

DEAR BRUCE: What are your thoughts on this new concept of taking out a home-equity line of credit, paying all of your bills, including your mortgage, out of it and, with the use of some expensive software, cutting your mortgage-payment time in half? The software will figure out when and how much to pay on your bills. Then you would apply all of your earnings on the home-equity line of credit, therefore only paying a small amount of interest on the credit line. — D.W. in Virginia

DEAR D.W.: While dozens of schemes will purportedly detail how to borrow your way to prosperity, I don't believe the home-equity line of credit — while a useful tool — will lead to that end. You call this a new concept — it's just another pitch to sell the expensive software. I could certainly be persuaded that this type of a scheme could work. However, I have never seen one that doesn't have a flaw. If you wish to convert me to this idea, you know where to find me.

DEAR BRUCE: My husband's father left us some gold Krugerrands after his death in 1976; we've also picked up a few more over the years. We have no idea as to the price for any of these. If we sell now, what happens to our income tax? Do we have to list the sales as income and pay tax, even though the gold is inherited? Will we have to pay tax on the full amount? We are on Social Security. — H.H., via e-mail

DEAR H.H.: Technically, any profits that you make from the sale of these Krugerrands, which were likely purchased for well under today's current gold price, is fully taxable on their appreciated value. However, if you sell a few here and there, I don't think anyone is going to check on their base value. Technically, the value of the Krugerrands when your father-in-law passed away would establish the acquisition value. Anything between that and the sale — minus commissions — would be taxable. While I know this is not a politically (or a legally) correct thing to say — you clearly have a legal obligation to report any sales — it's unlikely that the IRS is going to come after you. They have much bigger fish to fry.

Send your questions to: Smart Money, P.O. Box 2095, Elfers, FL 34680. E-mail to: Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.

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