Broker Check

The RFG Weekly Wealth Report

July 13, 2020

The Week on Wall Street

Stock prices notched substantial gains last week, looking past an increase in COVID-19 cases and any potential economic concerns raised by the trend.

FACT OF THE WEEK

On July 13, 1923, the Hollywood Hills were officially crowned when an epic $21,000 billboard "Hollywoodland" was built for the Hollywoodland Realty Company. In 1949, the Hollywood Chamber of Commerce took ownership and rebuilt the advertisement to the "Hollywood" sign, becoming an international symbol of today's entertainment industry.

MARKET MINUTE

The Dow Jones Industrial Average had only minor gains last week, 0.96%, while the S&P 500 climbed 1.76%. The Nasdaq Composite Index bounded 4.01% higher for the week. The MSCI EAFE Index, which tracks developed stock markets overseas, gained just 0.07%.

Virus Concerns

It was a volatile week for stocks as investors negotiated the crosswinds of encouraging overseas economic data with an accelerating number of COVID-19 cases in several states.

Ongoing support of the Federal Reserve's financial markets appeared to offset any concerns about an economic rebound. The big technology companies continued to shine, leading the Nasdaq Composite to multiple new record highs. News of positive trial results for a potential COVID-19 treatment boosted stocks on the final trading day, closing the week on an encouraging note.

On the Record

Regional Federal Reserve presidents had several speaking engagements last week, and the message was a consistent one: expect the economic recovery to remain bumpy.

Cleveland Federal President Loretta Mester said that the economy in her region is slowing due to rising COVID-19 cases. She also echoed earlier comments by Federal Chairman Powell that more financial support is necessary.

Meanwhile, San Francisco Federal President Mary Daly observed that it was unlikely many companies would be rehiring all their employees. Thomas Barkin, president of Richmond Federal Reserve, reiterated the challenges and strain labor recovery would have on local and state governments.

FINANCIAL STRATEGY OF THE WEEK

As Schools Extend Refunds, Potential Tax Snag Emerges

If you receive a refund for expenses paid out of a 529 plan, you may need to take action to avoid adverse tax consequences.

As efforts to stem the spread of the coronavirus continue, schools across the world have transitioned away from their lecture halls and embraced digital classrooms. On-campus housing facilities at colleges and universities are closing, and students of all ages are heading back home early to complete their studies.

Many of these institutions have begun to issue refunds to families for amounts unused. However, if you used funds from a 529 plan to pay for those education expenses, the refunded amounts may warrant further consideration.

Potential Tax Snags

Refunded amounts initially paid out of a 529 plan could create a unique tax situation, as payments for tuition, housing, and fees that were once qualified may become ineligible. When a refund is issued, the total amount of the qualified education expenses and the amount taken from the 529 plan will no longer match for the year they incurred. This mismatch could increase your nonqualified expenses when filing taxes – and it may result in a tax penalty.

Refund Contributions

For eligibility, the funds must be deposited within 60 days of issuance back into a 529 plan for the same beneficiary. Note that only the refunded amount is eligible for a 529 plan contribution.

It is imperative that you retain your documentation of the contributions and the receipts for the refunded amount, copies of checks, and statements from the 529 plan. Each 529 plan may have a different contribution process, so if you have received or will receive a refund, contacting the 529 plan provider is a great place to start.

Please contact our office if you would like to discuss specific guidance for your situation or any financial concerns you may have.