The Honolulu Advertiser from Honolulu, Hawaii • 62

PS Vdup Money Money Internet monastery: Monks in a New Mexico monastery have a page on the World Wide Web. E2 fc ji i i fVitl Sunday, December 10, 1995 Jane Oda. owner of H. Miura WHIT rz? All i ti 14 fill The Honolulu Advertiser TJ Some merchants say business is better By Suzanne Roig Advertiser Staff Writer Haleiwa merchants once worried that their quaint shops would be left in the dust by the gleaming two-lane Haleiwa bypass road. Now, two months after the bypass opened, convenience stores and gas stations say that their sales are indeed down.

But other merchants are saying that the bypass is proving an unexpected boon to business. Surf shops, for example, are reporting a 20 percent increase in sales over the same period last year. The town's 130 merchants some of them fourth-generation are only part way through the critical September-to-March season, when big waves attract people and big sales. So the final assessment isn't in yet. But some are reporting positive signs.

"The bypass is a plus for Haleiwa," said Surf 'n Sea owner Joe Green. "It takes pressure off the town. There used to be a crawl out here. A lot of local people refused to shop here because of the traffic." Before the bypass, it could take as much as 30 minutes to go from the Anahulu Stream bridge at one end of town to Weed Junction at the other. And it could take an hour or more to go the 8 miles from Haleiwa to Sunset Beach.

That bottleneck has been eliminated as motorists headed for points farther north hop on the bypass road. Now, Haleiwa's Kamehameha Highway is slow and steady enough so that cyclists and pedestrians don't fear for their lives. The previous traffic crunch had driven local residents away from Haleiwa, said Leslee Kanaiaupuni, owner of BK Ocean Sports. Now the residents are coming back. And merchants hope that new signs designed with a wave and a surfer and the words North Shore at the entrance to Weed Junction and the See Haleiwa, Page E2 ill Ox V.r.

I inifaTriiiiTifMifir-'ri 1 I ttJahu I ic I Area of maplhuS I1 rl IWaialiia Ip 1Tmile J3rtB4-' Haleiwa If I mm I I junction Waialua Beach Road sJ Waialua yy Weekly Wall Street, E3 Science, E6 Money Editor llene Aleshire, 525-8052 (r Joe Green, owner of Surf 'n Sea, says that the bypass around Haleiwa has been good for businesses-like his. Honolulu Advertiser "Before, people didn't, want to stop: because they'd lose their place in traffic, or they'd be afraid of never getting back on the Nalani Choy president, Haleiwa Mainstreet Association Deo- decrease in traffic will cause." But Ed D'Ascoli, owner of I XCEL, said that he thinks the bypass road's effect will diminish with time and that the state's economy will improve. And then maybe Haleiwa can start up some new events, now that it can cope with the traffic situation. "There's a variety of things we can do in the future," D'Ascoli said. "Not just for the; tourists, but also for the residents." By Suzanne Rolf credit for adoption expenses would be phased out for families with incomes above $75,000.

So before deferring income, assess whether you might be making yourself ineligible for some valuable tax breaks next year. Capital losses Investors may find it worthwhile to look through their portfolios to see if there axe any money-losing investments that they're ready to dump. The reason: The congressional tax plan would make "long-term" capital losses losses on investments held more than one year much less valuable. T. Under current law, capital losses can be used dollar for -dollar to offset any capital gains you have plus up to $3,000 a year of other Income, See Tsxes, Page E2 By Jane Bryant Quinn Rich don't pay capital gains taxes nfl ow are the truly rich I different from people I with garden-variety money? The Big Bucks folks yawn when they hear Congress' plans to cut taxes on capital gains.

That's because they avoid this tax, thanks to loopholes large enough to drive a zillion-dollar fortune through. Congress proposes to let you exclude half of your capital gains from tax effectively cutting the top rate to 19.8 percent, from 28 percent now. The rate remains zero, however, for the tax-savvy super-rich. Thanks to clever lawyers and new financial instruments, they're carving gaps in the tax code that seem beyond the reach of the IRS. If these loopholes were closed, the deficit might drop by several billion dollars a year.

But so far, Congress has chosen to balance the budget on other people's backs. Beating the system How do they get away with it? Here are two of the ways: Short sales of stock, against the box. People of ordinary wealth also use this technique, in an abbreviated version. But in their case, it just puts off the tax rather than erasing it. Say you bought Widgetex Co.

at $10. In this bull market, the price leaped to $50. If you sell, you owe taxes this year on a $40 capital gain. If you don't sell, you risk losing your profit if stock prices fall. Your alternative is to borrow shares of Widgetex from your stockbroker, and sell those shares instead of selling your own (that's selling "against the box," which means against shares that you already own).

The broker earns interest on the loan. You pocket the full $50 and owe no current tax. Your $40 profit is locked in. Any losses run up on one side of this trade will be offset by profits on the other. Sometime next year, you typically close out your position by giving your broker the shares of Widgetex you own.

Only then do you book your $40 profit, which defers your tax into 1996. The truly rich, however, borrow the shares from institutions or other large holders, and duly sell them for a pile of cash. But during their lifetimes, they never close out their positions. So they get their money and never have to pay the tax. The shares they borrowed are returned only after they die (death erases any capital gains tax owed).

Swapping holdings Total return equity swaps. This is for anyone who wants to switch one large stockholding for another. To play this new game, you gotta be rich. Bankers Trust in New York City requires at least $2 million on the table. Swappers temporarily give the future performance of their stock (dividends and capital gains or losses) to Bankers Trust or some other institution.

In return, they get the future performance of some other asset, like a different stock, a basket of stocks or Treasury bills. They haven't sold, so they owe no tax on their capital gain, says Michael Schler, tax partner at Cravath, Swaine Moore in New York. But they have all the benefits of selling, because they're now invested in something else. The return they're earning on their swap can build up untaxed. If the swappers need cash, they can take a loan against their position.

What's the solution? Close these loopholes by telling investors that they must pay taxes on their profits. Jane Bryant Quinn's column appears in the Sunday Money section. She welcomes letters on money issues and problems but cannot ofjer individual personal advice. You can write to her co the Washington Post Writer's Group, 1150 15th St. NW, Washington, C.

20071. 1 Advertiser graphic pie who drive by, see the shop Long-awaited bjrpass now may get underpass for an underpass that will dump motorists directly onto Kamehameha Highway from Wahiawa, making the bypass road almost like an offramp. The funds for this project would dry up June 30, though, said Hugh Ono, chief of the state Department of Transportation Highways Division. The state is counting traffic at the entrance to the bypass road to see if the underpass is needed, he said. Shop owners like Leslee Kanaiaupuni see the underpass Photographs by Bruce AsatoThe Store, savs a lot of her customers and stop.

as their ticket to future prosperity. Once the winter season's tourist-attracting big waves recede, so will their current double-digit profits, merchants say. "The bypass road has an effect on this town," said Kanaiaupuni, who owns BK Ocean Sports. "When it first opened and there were no signs, business dropped 25 percent to 30 percent. There's a lot of small merchants in this town that can't survive a drought that a off the tax for an extra year, which leaves you with extra cash to invest in the interim.

But for some taxpayers, deferring income may be counterproductive this year in light of the tax proposals particularly the child tax credit Some middle-income taxpayers will find that deferring Income to next year could push them above the income-eligibility limits for the credit Under the congressional plan, the $500 credit for each child would be phased out for families with incomes above $110,000 ($75,000 for single parents). President Clinton has endorsed the idea of child tax credits, but with a phase-out beginning at incomes of $65,000. Besides the child credit some other proposed tax breaks for next year also contain income restrictions, A deduction for interest on student loans would be phased out for families with incomes above $65,000 and a are The Haleiwa bypass road was first proposed three decades ago because, even then, the town felt overrun with cars. "The cars created a monumental traffic jam," said Pam Harlow, Haleiwa Mainstreet Association project manager. "That made it unpleasant for visitors and residents to stop and shop.

Forget about making a left turn into a parking lot." The state came up with alternatives to the bumper-to-bumper crush but ran into 1035 tax rates The first step in planning year-end tax strategy is to estimate what tax bracket you'll be in in 1995 and estimate your taxable income for 1996. Here are the 1995 federal income tax For married tax Over $0 $39,000 $94,250 I $143,600 I $256,500 For single taxpayers Get those tax breaks before the year's end problems, including opposition from local residents and a patch of protected wetlands that required special permits for a road to go through. When the bypass finally got off the drawing board and onto the pavement, it was April 1991. It was finally completed on Oct. 6, at a cost of $47.7 million, more than 10 times the original estimate of $3 million.

But that's all history, merchants say. Now comes the really hard part: Getting the state to spend $5 million more payers filing Joint returnsrV But not over $39,000 $94,250 $143,600 $256,500 Tax rate E315 28 36 39.6 But not over Tax rata $23,350 $56,550 $117,950 $256,500 era 15 28 36 3 39.6 household Tax rats 2 E315 3 31 fell ifciimt" "--3 354 33.6 Jennder Novxao, Gannett Now Samoa By Gary Klott Gannett News Service With Congress and the White House far from agreement on a budget and tax-cut pacicage, mieht seem riskv to be plotting major year-end tax-saving moves right now. But there are some tax-saving steps that can be taken now without concern as to what tax changes might eventually be enacted. General strategies Because the congressional tax bill doesn't fiddle with tax rates or basic deductions, tne traditional vear-end tax-savine strategy deferring Christmas bonuses and other year-end income until next year and prepaying some of next year's deductible expenses by Dec. 31 is still the best course for manv DeoDle who expect to be in the same or lower tax bracket next year.

Deferring income lets you put rates for taxable income: Over $0 $23,350 $56,500 $117,950 $256,500 For individual filing as head of Over $0 $31 ,250 $80,750 $130,800 $256,500 Cut not over $31,250 $80,750 $130,800 $256,500 Source; Detom Touch.