Happy New Year! If you're reading this, you survived the Y2K Armageddon. And so did we! And no doubt, the Internal Revenue Service did, too. So, let's get down to the business of coping with taxes in the new millennium. Today, we'll help you figure out your 401(k) cost basis, examine whether stock or commodities exchange members can be traders, determine if paying your parents' bills is a gift for tax purposes and discuss whether W-2 income disqualifies you from trader status. Send any other questions to
firstname.lastname@example.org , and please include your full name. Pretax contributions, including your employer's match, have no cost basis. When you take distributions, you will pay tax on the fair market value of the investments you are withdrawing from the account, says Bill Fleming, director of personal financial services for PricewaterhouseCoopers in Hartford, Conn. If your employer allows you to make after-tax contributions, that money would have a cost basis since you've already paid tax on those amounts. Keep track of that basis so you don't pay tax again on that money when you withdraw it. But you'll still owe tax on any earnings. Ask your tax questions on the TSC Tax Forum board . Taxes for Traders series for more of the pros and cons of trader filing status. Trader or Investor? The IRS Wants to Know . For the past six months, I have been trading my own account through an ECN (electronic communication network). I trade off a technical analysis system. I make an average of 150 trades a week. I hold no overnight positions. My trades last an average of eight minutes. I have made approximately $20,000 in six months. I am also a part-time mortgage broker. I made around $100,000. W-2 income, and taxes, were deducted from each paycheck. Do I qualify as a trader? -- Rick Scheu Rick, It sounds like you do. The only thing that might raise questions with the IRS is your W-2 income. The IRS might assume you have another "real job," and that your trading is a hobby. But that doesn't mean you shouldn't file as a trader. Just be armed with documentation so you can prove you're really a trader. Tax Forum for more on the ins and outs of charitable contributions.) And if -- God forbid, as my Italian mother says -- Buffett dies, the shares now are out of his estate and will not be subject to estate tax. Hey, you've got to find a silver lining somewhere.