Check state rules before doing Roth conversion

I would suggest that your readers check their state regulations before advising high-income clients to consider completing a Roth individual retirement account conversion.

As of Oct. 30, for example, Wisconsin didn’t recognize the federal regulation, making all conversions taxable in full in tax year 2010. The state will also subject any conversion done next year in which the income is in excess of $100,000 to the early-distribution penalty of 3.3% for anyone under age 591/2, as well as subjecting all high-income conversions to an excess-contribution penalty of 2%.

In addition, the latter penalty will stay in effect for the lifetime of the conversion. This will likely reduce or eliminate a number of conversions in Wisconsin next year.

It is in our clients’ best interests that we are aware of these state penalties before considering a Roth conversion next year.

Terry R. Kutz

Senior account executive

Equable Securities Corp.

Milwaukee

Tax issue an obstacle to H1N1 ‘telework’ plans

I read “Industry prepares for potential swine flu outbreak,” which appeared in the Nov. 30 issue.

Firms counting on telecommuting to help them sustain operations if there is a surge in the number of flu-stricken employees may find the plan difficult to implement because of a considerable obstacle to telework: the telecommuter tax.

Under a state tax rule known as the “convenience of the employer” rule, employees who work for a company over the state line and decide to telecommute when they wake up with flu symptoms may be taxed twice on the portion of salary earned at home: first by their home state and then by the state where the employer is located. The risk of receiving two state tax bills on the same income is a compelling reason to reject the telework option and head to the firm, strong evidence of contagion notwithstanding.

Legislation called the Telecommuter Tax Fairness Act (HR 2600) is pending in Congress that would eliminate the double tax risk, prohibiting states from taxing non-residents on wages earned at home. This bipartisan measure would make it considerably -easier for personnel with communicable illnesses to stay out of the office but on the job.

Congress must act quickly to remove the tax barrier to telework. It must pass the Telecommuter Tax Fairness Act now.

Nicole Belson Goluboff

Telework advocate and author

Scarsdale, N.Y.

Value Line’s fall from grace no surprise

To learn from the article “For Value Line chief, a dishonorable end to a 21-year reign,” which appeared in the Nov. 30 issue, that Value Line had been cheating its mutual fund investors came as no surprise.

In spite of Warren E. Buffett’s endorsement of the firm’s stock- picking system, it too isn’t what it appears to be.

Some 10 or so years ago, when I was in my doctoral program, a professor of mine had researched Value Line’s stock-picking prowess. His research concluded that the outperformance of Value Line’s “most timely” stocks was due to beta rather than alpha.

My professor’s research couldn’t discern whether the loading up of beta in Value Line’s “most timely” stocks was done with malice aforethought. But given your recent headline, this becomes a reasonable question.

Todd C. Ganos

Principal

Doolittle & Ganos Investment Counsel

Carmel, Calif.

Compensation practices at Finra are shocking

Thank you for the fantastic article “Finra execs pocketed millions in “08, while SRO was in the red,” which appeared Dec. 3 on InvestmentNews.com.

I own one of the roughly 3,000 member firms that the Financial Industry Regulatory Authority Inc. terms “small.”

I am also a licensed attorney and a certified public accountant, so I generally feel in the know on matters such as this.

I sheepishly admit that I didn’t have a clue as to the number and amount of the million-dollar compensation packages in place at the self-regulatory organization. Never in my wildest dreams did I consider that Finra’s self-appointed elite were, as you so aptly put it, “pocketing” so many millions in compensation during the biggest investment scandal and collapse in recent history.

Kudos to you for shedding light on a timely and relevant issue during a period when Congress is seeking an overhaul of the entire system. I take heart in knowing that the power of the press is still functioning in an attempt to bring about balance to the system.

Matthew Bishop

Managing principal

Bull & Bear Brokerage Services

Bull & Bear Capital Advisors

Jacksonville, Fla.