Ask A Genius 1189: What does Carole find amusing about Rick?
Author(s): Rick Rosner and Scott Douglas Jacobsen
Publication (Outlet/Website): Ask A Genius
Publication Date (yyyy/mm/dd): 2024/11/13
*Interview conducted in November, 2024.*
Scott Douglas Jacobsen: What mistakes does Carole find amusing?
Rick Rosner: My most recent mistake happened the day before yesterday. We decided to sell some old gold jewelry that had been sitting around unused. I called a place and asked, “What percent of the spot price do you pay?” Spot price is the current market price for gold, which is around $2,710 per ounce—a very high amount. They said if we brought in a Krugerrand, they would pay about $2,610, which is about 96% of the spot price.
Jacobsen: And what happened when you went in?
Rosner: We brought in our scrap 14-karat gold, which they weighed at 17.5 grams. They offered to pay 80% of the spot price. I was confused and said, “Wait, you told me on the phone you pay 96%.” They responded, “That’s for a Krugerrand, not scrap gold.” Carole chimed in, “You misunderstood.” I insisted I’d called, but she was right about the situation. I managed to haggle them up to 83%, but it still wasn’t great.
It was frustrating. I probably should’ve haggled harder. Years ago, when I was making jewelry for Carole, the standard was around 99% of the spot price. 80% is far from that. They reminded me that times have changed, and I got a raw deal. Carole found my miscalculation amusing, maybe more than she should have.
Jacobsen: Any other notable mistakes?
Rosner: Another example was when Carole’s mom needed to move out of her house because she was getting older and it was becoming unsafe for her. We had to decide what to do with the house, and I suggested renting it out. My reasoning was that it would provide income, improvements would be tax-deductible, and we wouldn’t have to pay taxes on the sale right away.
Jacobsen: Did you learn something new during that process?
Rosner: Yes, I didn’t realize at the time that when someone dies—in California and probably most other states—you get a stepped-up basis for the value of the house. Carole’s family bought their house in 1966 for $40,000 or $50,000.
Jacobsen: And when the house finally sold, how much did it go for?
Rosner: It sold for $1.6 million. But we didn’t have to pay taxes on $1,550,000 in capital gains because Carole’s dad passed away in the early 2000s. This meant that Carole’s mom became the sole owner of the house with a stepped-up basis. The “basis” is what you use to calculate capital gains taxes. So, when he died, the house’s value was adjusted up to around $1.1 million, which was its market value at that time.
There was still some mortgage on it, but essentially, we didn’t have to pay capital gains tax on the large increase in value. The taxable basis of the house had risen from the original $40,000–$50,000 they paid for it in 1966 to over $1 million when Carole’s dad died. I didn’t realize this at the time, so my main argument for renting it out to avoid immediate taxes was incorrect.
Jacobsen: And Carole still reminds you of that?
Rosner: Yes, she does, although it didn’t change our final decision. By the time we had to decide, we’d learned about the stepped-up basis and everything else involved. But she notes that I was initially wrong when we were casually discussing our options. Once it was time to make the real decision, we made sure to get all the information.
Jacobsen: Sounds like it worked out in the end, but it’s a funny reminder of how much there is to learn when dealing with these matters.
Rosner: It’s one of those things that sticks as a funny memory.
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