Physical Media Comeback?

People have argued that the DVD, the CD, and the paper book are dead.   But are they?

We recently signed back up for Netflix's DVD service, for two DVDs a month.  It doesn't cost much, and it allows us to view more recent movies that what is on Netflix's streaming service.  Funny thing, too, was that Netflix wanted to spin-off the DVD rental service and everyone thought it was dead.  But I think it may have new life, as there are just some things you can't get through streaming these days.

While Netflix streaming is still kind of cool, over the years, their catalog of movies and television shows has changed.   More and more content is second or third run movies, old television shows, oddball videos you've never heard of, and increasingly, content made expressly for Netflix.  Online competitors have started up - competitors who were once the content providers for Netflix.

And what is on Netflix one day, is missing the next - with little or no explanation.  Netflix is less and less a library of movies to watch and more and more of a quasi-pay-per-view channel with a flat pricing.   You can watch all you want - of whatever it is they have this month.  And whatever it is they have this month is often crap.

And of course, Netflix is now the World War II channel.   It seems that half the content is Nazi-related.   If you scroll through what's popular or what's trending, Hitler's smiling face looks back at you, over and over again.

What's up with that?  But I digress.

We were told by the powers-that-be that streaming was the next big thing and that Cable and physical media were dead.   Cable is down for the count, as they really don't seem to understand why no one wants their product anymore.   Like GM executives in the 1970's asking California dealers "when are people in California going to wise up and stop buying those stupid little Japanese cars?" the Cable business seems to believe their product is the greatest thing since sliced bread, and that the customers are wrong for disconnecting.

"They'll come crawling back, any day now!   You'll see!"  I am sure they say this to one another.

But the problem with cable is the staggering amount of advertising - about 50% of program time on many channels (and indeed many channels are just ads all the time).  Plus the ads are so loud - louder than the programming.   Plus, they bundle so much crap into the "basic" tier, that the prices are edging up into the three-figures every month (and four-figures annually) even if you don't want MTV and ESPN.   Some cable companies are starting to offer "a la carte" pricing, but the trend has yet to catch on.

Basic basic cable, with no frills, is basically useless.   You can get the same dreck off-the-air with a inexpensive digital antenna, if you are in a major market.  And that's free.

And digital streaming has taken away a lot of cable's thunder.   We watch television differently now, selecting what to watch, mostly commercial-free, rather than just "seeing what's on" and then being blasted with over an hour of commercials in the process.

Cable, on the other hand, made their product more and more toxic and just assumed that people would keep watching as they had no other alternative.    But eventually, people reach a tipping point, where they get sick of all the ads and just shut it off.  I know I did, well over a decade ago.   No TV was better than TV.   Still is.

As for Netflix, well, there are some issues with the streaming service.

Don't get me wrong - streaming is here to stay.   But as more and more studios start to pull content from Netflix and try to start their own competing services, the glory days of streaming are behind us.  The early days, when you could get the entire STARZ catalog on Netflix (oh those were the days!) are gone, when the STARZ contract expired.   And now Hulu wants a slice of the action, and some studios, such as Universal, have a channel on YouTube (with a lot of the back catalog for free, but the new stuff on pay-per-view).  Others, such as Comedy Central and Fox, have their own online streaming services (Fox requires that you be a paid cable subscriber in order to watch - irony).

Some wags have pointed out that if you sign up for all these digital streaming services, you might have a combined bill that rivals your old cable bill.   But of course, you'll have far fewer ads, and still you can select what to watch rather than seeing what is on (without having to dick around with some DVR).

But it got me to thinking, is physical media dead?   I think not, and for a number of reasons.   In fact, physical media can be a real bargin for the cheapskate in all of us.

First, if you want a new release, you have to either go see it in a theater, or pay for it on pay-per-view via cable.  But you aren't going to find it online, particularly not on Netflix.   You can buy the DVD or Blu-Ray when it comes out shortly after it hits Pay-per-view, or rent it from RedBox or get it on Netflix DVD service.   In terms of new releases of major motion pictures, physical media is the way to go.  In many cases, you can buy the DVD for less than the cost of one pay-per-view viewing.

Second, you can recycle it.   If you buy a DVD of a movie for a few bucks, you can then sell it at a garage sale, or even online on Amazon or eBay.   You can give them to friends, or swap or loan them out or whatever.   You own the media and you can do what you want with it, other than put on a public performance.  A streamed video, you watch once, period.

With CD's this effect is even more pronounced, as once you own a CD of music, you can rip it to your hard drive, put it on a memory stick or your cell phone or whatever device you want.  You can play it in your car via memory stick (or even upload it to the hard drive in the car stereo) and again, you can then sell the CD to someone else, or loan it to a friend, or whatever.   Of course, here it gets a little trickier from a Copyright law standpoint.   Technically, you can copy a CD to your iPod or other device or whatever to play it for your own amusement.   Re-selling the CD and keeping a copy is arguably piracy, however getting caught is not very likely.

Which brings up an interesting point.   Streaming music online is much easier to detect from a piracy standpoint - and many a teen has been busted for uploading music to file-sharing sites.   I doubt anyone has been busted for giving their copy of a CD to a friend (or indeed, selling it) after ripping it to their hard drive or iPod or iPhone or whatever.   Both are acts of piracy, one is easily detectable and easily prosecuted, the other is nearly impossible to detect.

Third, physical media is often cheaper.   You can buy used CDs and DVDs at a garage sale or thrift store for a buck or two.   The local library lends them out - which is free, a price we can all live with.   I was chagrined to see on Amazon the other day that a book I was looking at was $12.99 as an instant download to my Kindle, but that the actual physical copy of the book was only 99 cents plus a couple bucks shipping.   Why pay more for digital content, particularly when digital books are often poorly formatted and whatnot?

And while it lasts, our local library still has books they lend out for free to anyone.

Again, you buy a book, you own it.  When you are done reading it, you can give it to someone, sell it, donate it to the library, or whatnot.   A lot of used booksellers are not going broke just yet, but in fact doing more business than before by selling through Amazon, which gives them a worldwide audience for their product.

In terms of resolution and performance, physical media often has online streaming or digital downloads beat.  Like I noted above, a physical book is easier to read than a Kindle, although bulkier to carry around.   Online books are often badly formatted, and I notice often have typing errors, probably due to some character recognition software bugs.

Note also that when it comes to books, the selection of physical books is far greater than those offered for download.  Rare and out-of-print books, limited editions and small runs, as well as vanity press, are not represented online, and likely never will be.  They can be found on Amazon in physical form, often for only a dollar or two.   The "latest best seller" on the other hand, often goes for $10-20 or more.

DVDs and in particular Blu-Ray discs are going to provide better picture and sound and sync than online streaming.   Unless you pay a lot of money for top tier internet service, chances are, you can't stream in HD and sometimes (particularly with Netflix, which uses Silverlight) you end up with sync problems in the first few minutes of a show.   Physical media doesn't have this problem, provided it is handled properly and not scratched or damaged.

There is, also, I guess, the tangibility issue.   No, I am not one of those people who wants paper bills every month, so I can write checks and put stamps on envelopes.   And I am an early adapter of streaming (I guess more than 10 years now, at least).   I was a little slow to get into the Kindle, but my 1st generation model is still going strong.

But when I see some local band or group, and they are selling their CD during the intermission, it is much more fun (to me, anyway) to get a copy of the CD, autographed by the performer, and put $20 in their tip jar.   Downloading their music to a pod device just isn't as interesting, although I guess these days, fewer and fewer performers are burning CDs anymore

Will physical media go away?   Not for a while, I think.   You still see "new releases" being sold in Wal-Mart for $10 to $20, and of course all those bins of $1 to $5 discs, some of which are diamonds in the rough, and others of which are just dreck.  Music CDs, on the other hand, have largely vanished.

Apple has made a big deal about taking the DVD-ROM drives out of their laptops, forcing people to either rely on memory sticks or the cloud to offload data.   Of course, you can plug an external hard drive or DVD drive into your MacBook, if you want to watch a DVD on it.   And they are pretty cheap, too.

And maybe that is why physical media will stick around for a while.   I think a lot of people resent being forced into a new mode of operation.   Windows 10, for example, doesn't want you to run Microsoft Word, but instead subscribe to it as an online cloud service.   This sounds like a great deal for Microsoft, less so for the individual.   (Of course, Open Office from Apache is still available online as a free download.)

But physical media will act as a check and balance to these new modes of operation.   The streamers and digital data purveyors cannot arbitrarily raise prices, if the physical media versions are still available, and available in many cases, for a lot less money.

And hey, the kids at Urban Outfitters are making a big deal about playing old vinyl records.   Who knows?  Maybe in 10 years, the kids will play CDs just to be retro and ironic.

Save your CD collection!   Let's face it, you blew it last time around when you tossed out your old record collection.   Maybe this time......

(Just kidding, I sold all my vinyl and CDs at garage sales ages ago).

Resourcefulness is Spurred by Adversity

Leisure, wealth, and luxury are the enemies of innovation, hard work, and resourcefulness.

One reason inherited wealth is dissipated so quickly in this country is not because of inheritance taxes, the "death tax" or some such nonsense, but because of basic mathematics, as I explained in an earlier post.  If Geoffry B. GottRocks leaves 100 million dollars to his five children, they each get $20 million.  If they have five children each, they get $4 million.  And within three generations, the inheritance goes from fantastic to barely enough to live on.

And in those interim generations, there is a decision matrix with only three possible choices, and two outcomes (poverty or riches).   Again, as I noted in an earlier post, the heir can either (a) spend it all like a wild playboy, (b) carefully manage the money so as to live comfortably for the rest of their life, or (c) double-down their bet by investing the money in new ventures to possibly become even wealthier.

Option (a) is obviously stupid and has only one outcome - poverty.  Option (c) could work out spectacularly well, or end up just as bad as option (a).   Option (b) thus is the safe bet for heirs, and most of them take it.  Within a few generations, the money is spent, and the succeeding heirs rarely innovate or take risks with their money.

That's why I noted, in another post, why the Koch brothers are so unusual - they took option (c) and took a small fortune and parlayed it into an enormous one.  You don't see such risk-taking by second generation heirs very often.  And in fact, there are two other Koch brothers you never hear about, who took option (b) and live comfortably and in relative obscurity.

Rarely - rarely - does a life of wealth, luxury, and ease lead to aggressive risk-taking and innovation.   Adversity is our friend, not our enemy, as the "wolves at the door" are what motivates us to innovate, to become resourceful, to work hard, and to try new things.   We should not fear it.

What got me started on this was a discussion I had with a friend, who felt that every new college student deserved a brand-new car.   I felt this was kind of wrong, particularly if Grandma is having to co-sign on the loan.   Cars, houses, and other trapping of wealth are the rewards for obtaining wealth, and not something that should be handed out while one is still searching for it.

Another friend of mine gave their kid a new car in High School.  Well, divorced wealthy Dad gave the car (no doubt to assuage some sort of guilt feelings - and children of divorce, if they are smart, know how to play that card).   To me, this seems kind of obscene.  When I was in my 30's and a middle-class government employee schmuck, I had to hump to make payments on a used Camry.   And here's some 17-year-old kid getting the same deal, free and clear.

I used to wax and wash that Camry and take care of it.  It was special to me - my first car with power windows and air conditioning!   My young friend has already put two dents in his gift car, and doesn't seem to care much.  His Dad, alarmed at this, is punishing him by - get his - "forcing him to take it to a body shop to get it fixed"    Wow, punish me any day, Dad!  Particularly when  you are paying for the body work.

Divorced Dad is alarmed, no doubt, as he is my age, and remembers the clunkers he had to patch together when he was in college.   And as an equipment dealer, he is alarmed that his kid is so blase about denting up a brand-new car.  Why doesn't his son appreciate how difficult and expensive it is to buy a new car?

Well, duh, Dad - because you gave him one.  No one appreciates things that are free or below cost.   You give someone a Section-8 house and they will trash it.   Public housing projects get run down because the people living in them don't own them and didn't have to work for them.  It is the same-old, same-old, only this time applied at a family level.

I had to patch together a succession of $50 to $200 junkers for years while I was in high school.   I learned a lot about fixing up cars, and learned to appreciate how difficult it is to buy and own a car.  If I had simply been given a brand-new car, well my life would have turned out differently - and for the worse.

It is one of those "character building" exercises that parents used to talk about (but talk about no more).    Today, we are an incredibly wealthy nation - far wealthier than in the recent past.   A child today, in the middle class, expects to receive a computer, a smart phone, and a new car (or at worst, a late model used one).  They also expect to have their own television in their room, and the latest designer togs to wear to school.   If they are not provided with these things, they are bullied and mocked, of course, in the suburban hells that they live in.

Sadly, it seems that today, on the political landscape of the Left that this lesson has yet to be learned.   Young people - growing up no doubt with free cars from weekend Dad - are expecting the government to be the ultimate weekend Dad, and provide everything in life for free.   And of course, they will appreciate these gifts and not just shit all over them, because, well, because they will, is all.

Adversity is not the enemy - luxury is.   One reason the "kids of today" are struggling right now is that they grew up in an economy that was constantly expanding.   If you were a mall rat in 2005 and wanted a job, well, they were there for the asking.   Everyone was making bucks in the 1990's and early 2000's and life seemed pretty simple.   Then things changed and what they perceived as "normal" is no longer the case.   But of course, their normal was never normal in the first place.

Maybe the next generation - who have yet to be tagged with some moniker that we can use to pigeonhole them into oblivion - will see things differently.  Coming of age in 2008 and seeing their parents and grandparents "lose everything" including houses, cars, and jobs, they will appreciate little things a lot more, and not expect everything to automatically go their way.

One reason the "Greatest Generation Ever" was so great was that they had to deal with the Great Depression and World War II.   To them, early life was nothing but hardship and hard times.   You can only imagine how orgasmic the 1950's seemed to them, with prosperity on every street corner, and no Nazis to deal with.   And you could understand their frustration with the next generation, raised in luxury and rejecting it all as "not good enough".

Perhaps these things go in cycles.  As I noted before, when I graduated from high school, there were "no jobs" (unemployment topped 10%) and inflation was running 10% or more.   Gas was available on even and odd days only - if you could afford it.   And if you had a job and wanted to buy a house, interest rates were 12-14%, sometimes more.   But we succeeded and thrived, even then.   And when the economy improved, it was like an acid trip.

And funny thing, though, I always was nervous not when things were bad but when the economy was going like gangbusters.   Because rapid growth just didn't seem sustainable to me (and of course, it wasn't).

Adversity is a better teacher than luxury.   And in that regard, I am glad I had as much of it as I did.

The Renewal Gambit

Many organizations are resorting to "renewal notices" to get you to subscribe to their services or magazines, which often results in you having multiple memberships or subscriptions.

The Automobile Association of America (AAA) often called the "Auto Club" can be a good deal, for some folks, as for about $40 a year, you get free towing, which can come in handy, if you get into an accident.   When we were sitting by the side of the NYS Thruway with a wrecked car, the only question the Police and Towtruck driver had was, "do you have AAA?"

Of course, you can get "towing insurance" from your insurance carrier.  The last time I priced this out, however, it was more than the cost of AAA and there was a deductible.   Plus, AAA provides maps and other ancillary services, which to me, made the service worthwhile.

Other folks are not as impressed, and they raise some good reasons why maybe you don't need AAA.  But that is not the point of this posting.

What I find annoying about AAA is their billing practices.  Not a month goes by we don't get a "AAA MEMBERSHIP RENEWAL ENCLOSED!" mailing that is not a renewal of our existing membership, but a pitch for a new membership and if you are not astute, and you pay the "renewal" fee, you now have TWO memberships in AAA, one of which, of course, is useless.

And of course, when you do join AAA, be sure to join the right one.  There are a number of regional AAA's across the country, and if you join one outside of your region, it may be of limited use to us.  When we moved to Georgia, we renewed our "mid-atlantic" AAA membership, only to realize that it was no good in Georgia, at least for trip planning and other services.

Magazines like to do the same thing - which is probably an indicator of a dying industry.   Just as AOL used "negative option" marketing to sell its services when it was hitting the skids, many dying businesses today are using this "renewal" strategy to sell magazines or memberships.

A relative used to send us Smithsonian magazine - home of "gov't gold" and other crappy deals.   We kept getting "renewal" notices from them as well.

Mark used to get a food magazine, which I got him as a birthday present.  They kept sending us these same "renewal" notices, and we started getting multiple copies of the magazine.  I called the subscription department and they agreed to combine them.  I ended up with a five-year subscription as a result.

Another gambit the magazines like to use is the "Your subscription is about to expire!" gambit, where they offer to "renew" for low, low prices.   However, often these are sent out to all subscribers even though you have years left on your subscription.

It gets confusing and eventually I just stopped responding to all of them and let most of our subscriptions expire.   And we wonder why print journalism is dead.   Maybe toxic marketing is to blame.

Recently, we went through the same thing with the National Trust for Historic Preservation, which sells memberships which are partially tax-deductible and give you discounts at some historic sites.  They also send you Preservation magazine which doesn't have ads for "gov't gold" or Staur watches - just yet.

I joined up after visiting a local plantation, and since we are members of the Frank Lloyd Wright Foundation, it seemed like a good fit.   But like clockwork, we got one of those "Membership Renewal" mailers, and I sent off a check with it (they can't do this online?) to "renew" my membership, which of course, was not expiring.

And of course, this week, I get new membership cards in the mail, with a new membership number, and now two copies of Preservation magazine.   You guessed it.  They didn't "renew" my membership, but rather sold me a second one.

Why does this happen?   Well, the membership or subscription departments are often separate from the rest of the organization or in fact, they hire a marking firm to get new members and new subscribers.   And the marketing people realize that these "Membership Renewal" mailings work from two levels.

First, they get existing members paranoid that their membership is about to expire, and they sell a second membership.  Most people are too busy to care and just accept getting two copies of the magazine and two copies of the membership materials.

Second, people who are not members will open the mailing materials because they think to themselves, "Renewal?  I never joined this organization/subscribed to this magazine!  Why are they saying it is up for renewal?" and out of fear or curiosity, they open the mailer which is the whole idea in this era of direct mail marketing, when most people throw away mail. 

"Important Documents Inside!" is another one that pisses me off.   No, the documents are not important and your organization or magazine or newspaper - or whatever it is you are trying to sell me - just went down ten notches in my esteem book, because you have exposed your organization to be a bunch of lying bastards.

"Whenever you enter into a business arrangement, predicated on a lie, no matter how trivial, the relationship will only go downhill from there"  --Robert Bell.

It is so true, too.   If someone deceives you to get your business, they have telegraphed that they are deceitful liars and will steal from you in the future.   If you do business with such people - as opposed to honest people - then you will end up helping the dishonest businessman succeed.   The honest businessman will go broke, or have to resort to deception as well.   By doing business with crooked people, you create more crooked people.

So, how do you avoid this problem?  It ain't easy, as the "renewal" notices sent to you often have your name on them and appear to be legitimate renewal notices.

One way is to use the organization's online "membership" site, to renew or check the status of your membership.   Mark on your calendar (electronic) when the membership expires and then go online and renew.   I do this with State bar memberships, for example, which are kind of important.   Once you do this, you can confidently throw all renewal notices in the trash.

Another way, of course, is to just not join or subscribe and this appears to be gaining ground in this day and age.   Subscription services and memberships, when added up over time, can cost a lot of money.   And younger people no longer read print magazines and the like.

And maybe that is why they use this "renewal" gambit.  It is designed to snag confused oldsters, who are the core of their membership.

Very sad!


UPDATE:   In this morning's mail - you guessed it - an "RENEWAL NOTICE" from the National Trust for Historic Preservation.   I am going to let my membership expire.   These kinds of marketing techniques are deceptive.  I hope they fucking bulldoze their historic offices and put up a Wal-Mart.

Take a loss on an inheritance? Not likely.

If you inherit a house, do you owe taxes on it?  If you sell it for a loss, do you get to deduct that from your taxes?

I can see on Blogger what inquiries find this blog.  Some are rather fascinating, such as this one that came across the transom today:

"I inherited house worth $400,000 but can only sell it for 250,000"

Answer:  The house is only worth $250,000.   You may think it is worth $400,000, but the market is saying otherwise, by the fact you sold it for less.

We went though this recently selling a house belonging to a parent, that we thought was worth well over $600,000 but fetched only $450,000 on the open market.   Families tend to do this a lot - thinking that Mom and Dad's house is worth a fortune.  It is part of a natural tendency to over-value things we own, and under-valuing other people's things.

The fair market value is what you get for it when you sell it, not what you think it is worth.

Now in our case, divided by three, this was a nice windfall, but hardly a game-changer in our lives.   And if you think $150,000 is a lot of money, well, it ain't.   It is barely enough to live on for three years, for the average family.

But I am guessing where the viewer is going with this question.   You get a stepped-up basis in a home when you inherit it, so when you sell it, you pay no capital gains on the profit.

Again, calculating capital gains isn't hard.   You take your sales price (Amount Realized, or AR) subtract your "basis" (Adjusted Basis, or AB, which is generally, what you paid for it) and the difference is your gain G, or profit, which you pay tax on. 

G = AR - AB

For an inheritance, AB is the "fair market value" at the time of death, so in most cases, G=0 as what you sell the house for, shortly after you inherit, is in fact the fair market value of the home.  You pay no taxes on the inheritance, which is the biggest tax "loophole" there is.   Note that the dead guy you inherited from may have to pay taxes (the gift and estate tax) but that doesn't kick in, until his estate is worth millions.   So folks like us have nothing to worry about, when it comes to a "death tax".

Now, if you kept the house, and rented it out (hopefully at a monthly profit) for ten years, and then sold it, you might have a real gain.   For example, at the time of death, suppose you have the house appraised for $250,000.   You rent it for ten years, and sell it for $600,000.   You now have a gain of $350,000, the Amount Realized minus your "stepped-up basis" at the time of death.

And yea, the IRS has ways of calculating your basis, and you can calculate it by having an appraisal done at the time you inherit, or even an "historical appraisal" done years later, of what it would have been worth at the time of death.   Be prepared to document this, though, for Uncle Sam.

But if you rented the house out, you may have chosen to depreciate the property on your taxes, which only means that you took a standard portion of the Basis off your income each year, which in turn lowered your income tax burden.   Say you depreciated over 10 years (consult a tax adviser for details) and thus deducted $25,000 (10%) from your income each year (sweet!).  Your basis is now ZERO, as this depreciation is deducted from your basis ($25,000 x 10 years = $250,000).   We call this "Adjusted Basis" or AB.  And this house would be "fully depreciated" at this point.

So now, you sell for $600,000 years later, you owe capital gains tax on the whole $600,000.   Ouch.

And yea, I've "been there, done that" when I sold my office building for $680,000 after renting it out for a decade.   A nice profit, but the taxes due were on the entire sale price not just the difference between the sale price and what I paid for it.

It sounds bad, until you realize that 15% capital gains tax beats the snot out of 38% ordinary income tax - plus you delayed paying the tax by a decade!  You've converted ordinary income into capital gains, reducing your tax burden and delaying it.  Now you understand why so many people bought Real Estate like mad in the 2000's.  It was a tax shelter.

But getting back to our reader, I think his real question is, "Can I take a loss on the sale of the house?" and that gets very tricky.   If you sold the house right after you inherited it, or shortly thereafter, odds are, the answer is NO, you can't.  Just because you think it is worth $400,000 doesn't make it worth $400,000.   And the actual sale at $250,000 sort of trumps your wishful thinking.  Again, living in reality, here.

For a long-term loss, this may be easier to show, again, with proper documentation such as a historical appraisal.  For short-term sales, this is almost impossible.   Yes, technically, you can show a "loss" on an inherited property.   Doing so realistically is kind of hard.  Think about this for a minute.  You have inherited a quarter-million dollars tax-free.  But that ain't enough for you.  You want to claim this represents a loss to you.   Like my old tax professor used to say, "Pigs get fat, hogs get slaughtered" when it comes to the IRS.

Showing a "loss" in a manner which satisfies the IRS is tricky.   For example, with our situation, we inherited (along with two siblings) a house that "everyone in the family" said was worth $680,000 if not a million dollars.   We cleaned it out, had some work done to fix some broken things and then put it on the market at that price.

Well, six months later, not even one showing.  We lowered the price again and again, until we got an offer at $480,000.   So we took that.  That pretty much was the fair market value of the home.  Fair market value isn't what you think it is worth or what some paid appraiser said it was worth.  It is what a real buyer, "willing and able" will pay for the property.   Reality trumps fantasy, every time.  An actual sale beats wishful thinking, every time.

Why was the home worth less than we thought?  Well, with Florida's crazy "homestead" tax rules, the new owner is looking at a $10,000 property tax bill, if not more.   Our late relative was paying $2500 a year.   Throw in about $5000 in fire, flood, and hurricane insurance, and you are paying $1200 a month on top of whatever mortgage payment you have.

And since the zoning people clamped down on doing a "blowout" to make it into a three-story mini-mansion, the value of the property to a developer is far less.   We were sure a developer would knock it down and start over.  There were no takers.  Instead, a retired couple bought it to live in, doing minor remodeling projects to update the house.

Could we have taken a "loss" on the property?  No, likely not.   You see, a sale within a year or so of the inheritance pretty much sums up what the market value is of the property.   The IRS will tell you this, no matter how many paid appraisals you get (and we paid for one, believe me!).   And if you try to claim this loss on your tax return, without some serious documentation, you will likely get audited and nailed with back taxes owed, interest, and maybe even a fine.  Bear in mind the actual sales price will trump whatever appraisal you got on the place.

But this reader question illustrates how weak thinking works in the world.   People want to believe that things they own are worth more than they are because that works in their favor.   And when they can't get the sale price ("my price") for what they think is a rare heirloom, they throw a hissy fit.

To my prospective reader, I would offer this basic advice:  Be happy you inherited $250,000 tax-free.  The represents a quarter-million dollars more than I will inherit from my parents.  Whining that you deserved more is just making you look ugly.   Trying to claim a loss on your taxes?  Well, you deserve, wholeheartedly, the audit you will receive and the back taxes, penalties, and interest you owe.

More American crybabies.

UPDATE:  There are some odd situations where you may be able to declare a loss on an inherited property, but don't get too excited - it amounts to $3000 a year for a few years.

The house we inherited was part of a Trust, and it was inherited back in 2005 when the market was hot.   Since the Mother-in-Law had a life estate, the Trust could not sell the house until she died in 2014.   At that point the house was worth less than in 2005.

However, the difference, divided by three, was only $44,700.   Of this, only about $30,000 is counted by the IRS (as it is a "passive loss") and we can deduct only $3000 a year from our taxes (which at the 15% marginal rate is about $450.  A nice deduction, but not a money-maker.

The losses can be carried forward to the next taxable year where you will get another whopping $3000 deduction.

So, this is not a huge deal, after all.   Consult an accountant for more details and before filing your return!

Toxic Degrees

Graduating from University was once the key to success in the workplace.  But today, certain degrees from certain universities are not only worthless, they likely will insure you don't get a job.

We've talked about college degrees here before.  And I opined that some colleges and universities may go bankrupt in the next few years, as they struggle to attract more students - with a shrinking enrollment base, sky-high costs, and an increasingly worsening value-proposition.

And this has happened, to smaller liberal arts colleges, such as Sweetbriar and the like - and it will continue to rise.  Religious schools, single-gender schools, traditional black colleges - all are first to feel the pinch.

An unexpected side-effect of this trend is playing out on college campuses across the country.  Colleges and universities are so stressed financially and struggling to attract students, that not only are they building rock climbing walls in the student center and dumbing down the curricula, they are caving in to the most idiotic of student demands.

Kids today want "safe spaces" and tenured professors fired the moment they express any non-PC opinion.  Meanwhile a professor can deny the holocaust, call the victims of 9/11 "little Eichmanns" or deny the shootings in Connecticut took place (and harass the parents of the dead children) and the students rush to defend their "right to free speech" and decry the university's efforts in firing them.  (Fortunately, the universities were successful nevertheless).

A college degree, in the wrong subject from the wrong university, could not only be useless, it could be worse than useless, as employers would look at your college experience and shy away from hiring you.   Many employers are already deciding that a college degree isn't necessary for many jobs, and may in fact be a hindrance:

"The move comes as smaller employers are shifting away from hiring graduates or university students, believing kids are coming out of university with “no real skills” or simply being taught the wrong things."

Think of it this way:  If you are an employer, do you want to hire someone who spent their college career protesting for "safe spaces" or "Black Lives Matter" or "occupying Wall Street"?    Would you hire someone who took over the Dean's office or made a list of "demands"?  Are these people who are likely to be productive employees, or troublemakers in the workplace?

Would you hire them?   Because if they went after their own professors, who's to say they won't come after you next?

And by hiring such folks, are you really gaining insightful experience from a college graduate, or a guaranteed lawsuit with regard to race, sex, or gender discrimination?   Or unionization activities?  Or at best, someone who has no idea what hard work really means?

I suspect in coming years, degrees from certain notorious universities which seem to be concentrating more on protesting than education, will be not only worthless, but less than worthless.   In short, you would be better off leaving such degrees off your resume when applying for a job.  Such degrees would be toxic to your future.

And to think, you spend $100,000 to get one.

And this is not a new trend.   Back in the 1970's and 1980's, young graduates complained that they could not get a job as they had no "experience" for many high-paying jobs, but were "overqualified" for low-paying jobs.   They were mystified as to how they ended up in this conundrum.  Of course, if they had any smarts - or empathy for a prospective employer - they would see right away what the problem was.

The reality is, a graduate in "communications" from Bong-Hit University with a C average is not really sought out by anyone.   The degree doesn't by itself qualify the candidate for any kind of employment, as bereft of real-world experience, they would be a burden to an employer, not an asset.

And such a degree, far from being an indication that the applicant is a go-getter, intelligent, and and asset to the organization, is just an indicator that the person applying is lazy, unmotivated, likely on drugs, and bound to be a troublemaker.

So back then, we had the same situation.   People went to college and graduated with what were, in effect, toxic degrees.   And even back then, some reported finding work only after leaving their degree off their resume as low-wage employers didn't want some liberal-arts college pot-smoking troublemaker explaining to the employees exactly how they were being exploited.

This is not to say all degrees from such institutions are worthless or toxic.   If you graduate at the top of your class or move on to graduate work elsewhere, you may be sought out as a worthwhile candidate.   But such folks are in the minority in any graduating class.

And today, if I was an HR director for a large company,  I would start to assemble a "black list" of colleges not to hire from.   And it would not be hard to do - just read the newspapers and write down the names you read in the articles; Brown, Columbia, Smith, and so on.   Actually, such lists have already been compiled for you.

Of course, a lot of the grads from such schools aren't interested in jobs.  Either they come from wealthy families, and after playing at being a protester, they will settle down and work at inheriting money.  Or, like Cornell students, they end up working at the coffee shop they patronized for four years as a student, and not much changes in their lives.   And of course, a third group never leaves college - going on to one graduate degree after another, and finally landing a position as professor, so that they can share their "real world" experiences with a new generation of young people.

It never ceases to amaze me that kids can be smart enough to go to college and not figure all this out.   I guess in the 1960's and 1970's college was cheap enough that it didn't matter too much - you just wasted four years of your life.  Today, though, with a "mortgage on your life" at stake, it seems kind of obscene that colleges are letting kids graduate with these horrendous debts and degrees that are not only worthless, but toxic.

But then again, it seems they let anyone in college today.   It is the new high school.   And these graduates, not being very bright, count on electing Bernie Sanders for President, as he promised them free college, student loan debt forgiveness, and a guaranteed job.   And they think this is a plausible solution to their problems.

You can see, right away, why they aren't finding jobs.