Payment in Kind

Well, I'm a little hesitant to write this post, because it deals with the intersection of two topics that some folks find rather sensitive: money and religion. I can anticipate that some readers might question both my motive for writing this and the propriety of what I did. Let me just say at the outset (1) that my motive is simply to explain the logic behind this approach, and (2) that I would respect (but disagree with) anyone who finds it objectionable for any reason.

I'm a Mormon, and my church encourages the practice of tithing. Members are encouraged to donate ten percent of their income to the church. Today, most contributions are in the form of cash or check, but in earlier, more agrarian times it was common to pay tithing "in kind" by actually delivering grain, livestock or produce. The church still has a "Donations-In-Kind" office, but now the most common donation is not apples or cattle, but rather appreciated stock. Let me walk you through a hypothetical scenario to illustrate the tax consequences of such a donation:

Imagine, for the sake of simplicity, that in Year 1 you have an annual income of $100,000, and therefore pay tithing of $10,000. The U.S. tax code allows you to deduct charitable donations from your income, so you'd only pay tax on $90,000. Assuming, again for the sake of simplicity, that your tax bracket is 20%, you'd pay $18,000 in taxes, leaving $72,000 in post-tax, post-tithing income. Of course, I'm ignoring any other deductions or credits.

Now, assume that you decide to use $1,000 of that post-tax, post-tithing income to purchase 1,000 shares of Acme Corp. stock, which is trading at $1 per share. You don't have any inside information (which would pose problems beyond the scope of this post!), but you just have a sense that demand for anvils and jetpacks will go up.

By the end of Year 2, your investment has performed smashingly--Acme Corp. is now trading for $11 per share, making your holding worth $11,000. But you're ready to unload the stock, since you think it has reached its peak. You also need to pay tithing on your annual salary (again $100,000) and on the increase in value of the Acme stock ($10,000--remember, the initial $1,000 investment was post-tithing). So you owe $11,000 in tithing, exactly the value of the Acme stock. You have two options:

1. You can sell the Acme stock for $11,000, and donate the proceeds as tithing. From a tax perspective, you would have total income of $110,000 (salary plus capital gain), and would be able to deduct the charitable donation of $11,000, leaving you with a taxable income of $99,000. At a 20% rate, you'd pay $19,800 in taxes.

2. You can donate the Acme stock directly to the church and designate it as tithing. Under the tax code, you do not recognize the income on the appreciated stock, so your income for tax purposes is only $100,000. But you can still deduct the full value of the stock ($11,000) from your income as a charitable donation, so your taxable income is now only $89,000. You'd pay taxes of $17,800, a tax savings to you of $2,000.

From my perspective Option 2 is the clear winner here, but I want to try to address some of the objections I think people might have.

Aren't you short-changing the church by giving them stock when you think the price will go down? No, because the market value at the time of donation is the true value to the church. I'm quite certain that the church immediately sells the stock (paying no tax on the sale), and then puts the cash into a more stable investment. So, in the example, the church ends up with $11,000 in cash regardless of whether you choose Option 1 or Option 2. But even if the church were to keep the stock, that would be part of its overall investment strategy, and would be entirely out of your hands. You've paid a full tithe by transferring $11,000 in value to the church.

Isn't it dishonest to evade taxes by donating stock instead of cash? No, the law distinguishes between tax avoidance and tax evasion. The Supreme Court has repeatedly stated that taxpayers are free to order their affairs in such a way as to reduce their taxes, so long as they stay within the law. For anybody who cares, the landmark case is Gregory v Helvering. If there are two ways of accomplishing the same thing, there is no barrier to choosing the way that involves the lowest taxes.

Aren't you somehow tainting your religious practice by finagling a personal tax savings out of it? I don't think so, and certainly not any more so than by deducting my cash contributions, which I think is pretty uncontroversial. The tax code allows deduction of charitable donations for a reason: to encourage private generosity. Although I like to think I would pay tithing whether or not a deduction was available, I am engaging in exactly the behavior the policy is designed to encourage, and so I feel no hesitation to avail myself of it.

If you think this seems fishy, I'd honestly be interested to hear your objections. I have given this a lot of thought, and I'd like to know what other people think. My own experience was much more modest than the example above, and I was very fortunate that my small investment went up rather than down. A quick note: most people who own stock do so in an IRA, a 401k or some other tax-advantaged vehicle, which would make this approach moot.

Puzzle solution: chemistry and rock bands

To solve this puzzle, the bold font at the beginning of each word had to trigger a memory of something hanging on the wall of your high school chemistry classroom: the periodic table of elements.


Then, assuming you remembered what element each abbreviation stood for (or you googled it), you had to do a little word association. For example, one of the few synonyms for "blimp" is "zeppelin" (remember the Hindenburg?). Combine that with the element whose abbreviation is in the word, and you get...



In fact, Led Zeppelin's name came from a prediction by Keith Moon (drummer for The Who) that the band would "go over like a lead balloon." And their first album had a drawing of the Hindenburg disaster on the front cover. I don't think anybody knows what happened to the "a" in "lead."

Anyhow, keeping "iron" in mind and working off the clue "female" will lead you to...

Yes, Iron Maiden, the British heavy metal band, popular in the 1980s, who had quite the penchant for disturbingly grisly imagery. My good friend in high school, Stewart, was a fan and had a collection of Iron Maiden black t-shirts, including one showing a skull being broken open with a spoon like a soft-boiled egg. Yegch.

The third one was the trickiest for me to come up with, and you had to notice that chemical symbol for nickel is backwards. Also, the word "invert" might help lead your mind to...



So there you have it, three bands with chemical elements in their names. I tried to think of more, but nothing else readily came to mind. I love Bob Seger and the Silver Bullet Band, but Agmmunition seemed like a bit of a stretch.

The winner is lincolnlogger. Honorable mention goes to my sister Melinda, who was the first to solve it.

Contest

OK, so it's been a long time, and probably nobody even checks this blog anymore. But if you do, here's your chance to win! This is the first ever UER contest, so dust off your gray matter, and see if you can figure out what the following words have in common (and I have to admit that I'm using the term "word" a little loosely):



Don't leave the answer in the comments (although you're free to leave general comments). Instead, email your answer to unraveleveryriddle@gmail.com, and I will select the winner at random. If you can think of another appropriate entry for the list, please send that along as well.

What is the prize for the winner? I've been struggling to think of something that would provide at least a mild incentive to expend some effort in trying to think of an answer, but that wouldn't, as they say, break the bank (and my bank has a very low breakage threshold). The best thing I could come up with is a custom made, one-of-a-kind exclusive Unravel Every Riddle bumper sticker, which may or may not consist of an oversize Avery office mailing label printed out with "UER" in a large font. But your true reward is knowing that you bested the competition in the first of what I hope will be many scintillating intellectual contests among my loyal readers. Both of you.

From the Department of Redundancy Department

My brother-in-law (fellow holder of a degree in linguistics) sent me this clipping he came across in a random newspaper. I'm not sure whether this was an unintentional lapse in editing or a deliberate attempt at humor, but it's pretty funny either way.

Laundry RBI

It's staggering how much dirty laundry a family of 6 produces, especially when 4 of the 6 are under age 10. I remember when I was single and in college, I sorted my laundry into two piles: light and dark. Now we often have enough dirty clothes to make much finer distinctions: we'll run a dark blue load, followed by a light blue load, a dark red/orange load, a white load, and then an off-white load, etc. Of course, it's one thing to start a load of laundry, and quite another to see it through to completion, with everything folded up and put away. As I was thinking about this recently, my thoughts drifted to an unlikely analogy: baseball.

Putting a load in the washer is a lot like hitting a single: it's a good start, but you've still got a lot of work to do before there's any real payoff. If you want to start another load, then you're forced to advance the first load to second base (the dryer). At this point, the first load is in scoring position. If you hit another single by starting one more load, then the original load advances to 3rd base (the laundry basket), and if it's not too difficult to fold and put away, you can easily score yourself some clean laundry in the drawer or closet.

Often, though, it's more important to advance the runners than to get another single, so you just run downstairs, move the wash to the dryer (or the dryer to the basket) and don't try to start another load in the washer. This is a sacrifice. While not ideal, this is better than stranding a runner on base. Stranding a runner on first base consists of leaving wet laundry in the washer so long that it starts to smell funny. Then that load is out, and has to return to the dugout until you can hit another single with it. The saddest of all is when you strand a runner on third. This is when you have perfectly clean laundry in the basket, but you put off folding it and putting it away, and then some kid knocks over the basket, the clothes get scattered and mixed with yesterday's pajamas and today's burp rag or trampled underfoot, and then all your effort advancing that load is for naught.

Right now, we have runners at the corners, and I'm off to see if I can get an RBI before bed.

KenKen

Every night before we go to bed, Andrea and I wind down by doing a new Japanese puzzle called KenKen. You may be familiar with Sudoku, and KenKen is similar, but better. It was invented by a Japanese math teacher and actually involves math (unlike Sudoku, which could just as easily use the letters A through I as the digits 1 through 9). Anyway, here's a sample KenKen grid.



Each row and each column has to contain the digits 1 through 6. So far, sounds just like Sudoku. The twist is this: each area bounded in bold (sometimes called a "cage") has to contain digits that give the numerical result in the upper left hand corner using the operation indicated (addition, subtraction, multiplication or division). That sounds complicated, but it's actually not. Look at this cage:



Because "3-" is in the upper left hand corner, the two digits that go in this cage have to fit in the following formula:

___ - ___ = 3

In other words, it gives you the operation and the result, and you have to provide the "operands," to use a math geek term. In this case, there are 3 possible pairs (6,3) (5,2) and (4,1):

6 - 3 = 3
5 - 2 = 3
4 - 1 = 3

The order doesn't matter. Sometimes a cage has only one square, and no operation indicated, like this:



All this means is that they are providing a "gimme," and you just fill in the square with the number shown, like this:



Why don't they just fill in the square for you? Beats me. Anyhow, you have to use logic to eliminate possibilities and fill in the whole grid. For instance, consider this cage:



You know that the two digits have to satisfy the formula

___ ÷ ___ = 3

The only possibilities (using digits 1 through 6) are

6 ÷ 2 = 3
3 ÷ 1 = 3

But because the digit 3 appears in the same column as the cage, you know the cage can't contain another 3 (remember each row and column must contain the digits 1 through 6). So the two digits in the cage have to be 6 and 2. Since order doesn't matter, it could look like this:



or like this:



You don't know yet which of those is correct, so you can't fill in the squares definitively yet. But knowing that those are the possibilities helps you with the cage right below that:



This is the one I talked about before that had three possibilities:

6 - 3 = 3
5 - 2 = 3
4 - 1 = 3

But now you can eliminate the first two of those possibilities, and you know that the cage has to contain 4 and 1 (in either order). Now look at the entire column.



You know the top square in the column contains 3, the upper cage contains 6 and 2, and the lower cage contains 4 and 1, so the digit in the bottom square has to be 5 (again, to satisfy the rule that each column and row must contain the digits 1 through 6). So you can definitively fill in that square with a 5, like so:



Now you're on your way to solving the whole puzzle, because the other number in the cage with the 5 can only be 1.

5 - 1 = 4



So, you'd like to try one for yourself? Andrea and I have two sources for our puzzles. The one I've used here comes from the New York Times puzzle page. They have interactive KenKens at differing skill levels. You can even try a 4 x 4 one to get the hang of it. We also do the daily puzzle from the UK Times online, which we just print out and do the old-fashioned way--with pencils.

Politics

A conversation that took place 5 minutes ago, while I was putting the boys to bed for the night. The boys got to "vote" at school today, and we had been talking about the election and the electoral college.

Eli (9 years old): I'm ashamed to say that my home state of Idaho is voting for John McCain.
Adam (7 years old): Haha! I was born in Michigan, and Michigan is voting for Barack Obama!
Eli: Dad, what about California where you were born?
Dad: California is totally voting for Barack Obama.
Adam: I forget, where was Mom born?
Eli and Dad (in unison): Massachusetts.
Adam: Who is Massachusetts voting for?
Dad: Barack Obama for sure.
Adam: How do you know?
Dad: Massachusetts always votes for the Democrat.
Adam: There's one thing I don't like about Democrats. It sounds like that crat stuff you put on hot dogs sometimes.
Eli: Sauerkraut?
Adam: Yeah!