
##2018850 Section : INVESTING <p> Expanding petrochemical plants around Houston will keep business growing for the Kirby Corp. , whose Dixie Carriers subsidiary is a top barge operation <p> Some places are hot while others are not . Here are six regions where savvy investors will make money in the 1990s . <p> Look northwest , young investor . Let 's say that three years ago , you wisely saw a bonfire building in exports from Oregon and Washington , sparked by strong airliner and timber sales to Europe and the Far East . So you bought shares in the Composite Northwest 50 Index , a mutual fund that holds stocks tied to that region 's economy . Since then , while few money managers have beaten the overall stock market , you and your fund have prospered : Composite Northwest scored a total return of 55.7% , nearly 11/2 times better than Standard &; Poor 's 500 . <p> The moral of this tale : in the eight years since the last national recession , a pattern of powerful regional business cycles has taken shape , offering opportunities @ @ @ @ @ @ @ @ @ @ the key players . National business cycles have n't been repealed entirely . Softness in enough parts of the economy could still produce a countrywide recession , but that is less likely than in the past . " Now we have a more diversified economy , where exports and other international factors play a bigger role , " explains chief economist Edward Yardeni of Prudential-Bache . <p> To choose the best regions for investors in the 1990s , we looked first at projections of growth in jobs and population by the economic consulting firm DRI/McGraw-Hill . " Where jobs are expanding , that attracts migration , " says DRI senior regional economist Beth Burnham Mace . And that in turn fuels retail spending , adding more jobs and ensuring strong growth . Employment in the six standout regions that MONEY identified is expected to expand in the 1990s by 15% to 22% , compared with a projected 13.8% national average . Population in our six areas will grow 9.5% to 23% -- against 7.2% nationally . <p> In addition , better climate and lower living costs in states in the southern @ @ @ @ @ @ @ @ @ @ and people , according to DRI and U.S. census projections . And many economists believe that the federal bailout of failed savings and loans will boost the economies of Texas , New Mexico and other states where S &L; problems have been acute . By one estimate , over 30 or more years Texas could receive $4,775 more in federal funds per resident than its citizens pay out in federal taxes , thanks to the bailout . Upshot : the move to the sunbelt of the 1970s and early 1980s -- interrupted by the oil bust in the mid- ' 80s -- is resuming . That explains why most of our hot regions are in the sunbelt . <p> We ranked the regions on the basis of investment opportunities . For example , the Southwest outside Texas -- an area that is expected to be tops in both jobs and population increase -- stands only third on our list because of a paucity of large , publicly traded companies positioned to cash in on that growth . Our advisers ' picks are either in businesses dependent on a regional economy 's @ @ @ @ @ @ @ @ @ @ in a region by its raw materials or transport system ( a barge line hauling commodities from Texas on in land waterways , for example ) . <p> How much money should you invest regionally ? Portfolio analysts note that the risk varies from region to region and cycle to cycle , but they generally recommend that you commit no more than 10% to 15% of your portfolio to such investments . <p> Here is a closer look at our six picks . Note that where individual states -- Florida , Hawaii and Texas -- have distinct economies , we have treated them as regions unto themselves : TEXAS <p> Bouncing back from a decade when its growth business was bankruptcy law , Texas is expected to outpace the national economy handily through 2000 . Job growth is projected at 1.6% a year , compared with 1.3% nationally . The Texas economy now lives and dies less on the swing in oil prices : energy accounts for 15% of the state 's economy , compared with 27% in 1981 . " Over the next 10 years , Texas will see steady @ @ @ @ @ @ @ @ @ @ of the Center for Economic Development and Research at the University of North Texas . Cheap office space and low living costs already have led 49 companies -- including Exxon and J.C . Penney -- to move to the Dallas area in the past two years . Office construction has begun in that area for a number of relocating companies , including GTE Corp . and MCI Communications . Forecasters also believe that housing construction will pick up in the next two years . All of this building should benefit Justin Industries ( recently traded over the counter at $16 ) , a maker of bricks and other building materials , with estimated 1990 annual revenues of $300 million , says research director Eugene Melnitchenko of the Dallas brokerage Eppler Guerin &; Turner . <p> Petrochemicals are also perking along , with companies planning to expand production by 15% for two major products , ethylene and propylene , in the Houston area . A major beneficiary could be $170 million Kirby Corp . ( American Stock Exchange , $10.75 ) , the country 's largest operator of inland tank barges . @ @ @ @ @ @ @ @ @ @ demand for environmentally clean natural gas , nudged by government regulation and an end to the oversupply of the past decade , will push up prices 25% by the early 1990s . They are recommending gas exploration companies such as $10.5 billion Enron ( New York Stock Exchange , $56.75 ) and $2.6 billion Arkla ( NYSE , $23.50 ) . <p> Fund of the Southwest ( 4.75% load ; 800-262-6631 ) invests mainly in firms doing business in Texas and five other states -- Arizona , Arkansas , Louisiana , New Mexico and Oklahoma . Since manager Sharon Stone , 34 , took over the fund in 1987 and diversified into consumer-product companies , the $15 million portfolio has outperformed the S &P; 500 by three percentage points in 1988 , 1.2 points in 1989 and one point so far this year . ( The mutual funds cited in this article are sponsored by small to medium-size money-management companies in their respective regions . ) PACIFIC NORTHWEST <p> Even before its moist piney Vistas and superior cherry pie were getting prime-time praise on ABC-TV 's Twin Peaks , the Northwest @ @ @ @ @ @ @ @ @ @ life will keep them coming . Douglas Pedersen , an economist at the Security Pacific Bank in Seattle , looks for " a rapid inflow of new residents , plus strong income and employment gains . " Washington and Oregon are projected to add new jobs at about a 2%-a-year pace-double the national rate -- in the early 1990s and 1.5% later on . <p> Pedersen points out that the region is coming off unsustainable boom levels : nearly 1.00,000 new residents and about 5% job growth in 1988 and 1989 . But new businesses have built in something this region never had before : stabilizing economic diversity . To its traditional mix of airplane manufacturing and lumbering , the Northwest has added a burgeoning technology sector . And soaring trade with the Far East -- from importing clothes to exporting high-tech components -- is fueling growth . <p> Foreign passenger-plane orders keep swelling the backlog at Boeing , which still generates 15% to 20% of Washington State 's economic activity . But after a nearly 50% run-up in Boeing 's share price so far this year , many analysts deem @ @ @ @ @ @ @ @ @ @ Jr . in Seattle recommends two Boeing suppliers instead , both trading at a price/ earnings ratio at or below the stock market 's . Eldec ( OTC , $12.50 ) , with $110 million revenue , produces airliner parts ; $500 million Precision Castparts ( NYSE , $31.50 ) makes jet engine parts . <p> In the timber and paper business , torn over the endangered spotted owl , pending restrictions on cutting timber on federal land will benefit Weyerhaeuser ( NYSE , $25.75 ) , argues Whitlow 's Dain Bosworth colleague George Haloulakos . Weyerhaeuser ( revenues of $10.3 billion ) owns 2.9 million acres of timberland in the Northwest -- double its closest competitor . <p> The Composite Northwest 50 Index Fund ( 4.5% load ; 800-543-8072 ) closely reflects the northwestern economy . The fund holds 50 stocks at a time within industry sectors weighted by their contributions to personal income in the region . Annual returns over the fund 's 31/4-year life average 20% vs. 13.5% for the S &P; 500 . SOUTHWEST OUTSIDE TEXAS <p> By the year 2000 , the lonesome mountains and deserts @ @ @ @ @ @ @ @ @ @ development . Nevada is forecast by DRI/McGraw-Hill to be No. 1 in both population and job growth , while Arizona , Colorado , New Mexico and Utah are among the top 10 states for both categories after growth picks up by 1992 -- though parts of the region are still coping with economies stunned by real estate problems . Casinos account for 45% of the Nevada economy , but much recent growth has come from small manufacturing companies in such fields as medical instruments and aerospace parts . Many are refugees from high-tax California , and unfortunately most are not publicly traded . <p> Among stocks you can buy , manager Sharon Stone of the Fund for the Southwest favors Southwest Airlines ( NYSE , $26.50 ) , with revenues of $1.1 billion and a heavy schedule of short-hop flights throughout the region . Industry analysts say Southwest is a low-cost airline with a high level of customer satisfaction . For income-oriented investors , Value Line analyst Guy Woodlief suggests $10.2 billion U , S. West ( NYSE , $36.50 ) , which provides phone service for all of the region @ @ @ @ @ @ @ @ @ @ Rising business telephone use should keep the company growing , he says . Its dividend , already yielding 5.3% , could increase by 5% a year over the next five years , he adds . HAWAII <p> The Japanese appetite for Hawaiian land has kept a real estate run-up going at a time when markets elsewhere are melting . Honolulu housing prices rose 25% in 1989 alone . With Hawaii 's population expected to expand nearly 20% by 2000 , the state will add new jobs at a 1.7% annual rate -- 30% faster than the national average . " The real estate boom will continue because there is strong foreign demand for residential and commercial space and very little supply , " says Bert Dohmen-Ramirez , an investment adviser in Honolulu . <p> How does an investor enter this pricey scene ? Not through REITs or companies solely in local real estate , advises Dohmen ; they tend to be too heavily in debt . Instead , he suggests two companies with large Hawaiian real estate holdings that stand to benefit from Asian demand as well as other operations . @ @ @ @ @ @ @ @ @ @ revenues of $770 million , grows sugar cane and operates the largest shipping line hauling freight between the islands and the U.S. West Coast . And Castle &; Cooke ( NYSE , $30.50 ) , with revenues of $3 billion , owns 98% of the island of Lanai , where it has just opened a new luxury resort : . The company also includes the pineapple producer Dole Food , which it plans to spin off soon . Dohmen believes that the two parts will be worth more than the current stock price . FLORIDA <p> With sand and sun and Mickey Mouse to attract tourists and new residents , Florida is forecast to be the decade 's second-fastest-growing state in population after Nevada . Retirees will be prominent among the arrivals , but jobs are also expected to increase at a robust 2.1% annual rate . <p> One way to invest in this vigorous growth is through $360 million Advanced Telecommunications ( OTC , $20 ) , which has 10% of the Florida market for long-distance services . Advanced , which concentrates on small businesses and offers below-AT &T; rates @ @ @ @ @ @ @ @ @ @ the next five years , says analyst Robert Bolen of the regional brokerage J.C . Bradford &; Co. in Nashville . <p> And then there 's the Orlando play . In addition to the Mickey and Goofy gang , a movie studio in Orlando opened in June by Universal is drawing big crowds , including a flood of foreign visitors drawn by a weaker dollar as well as the Hollywood-comes-East ambience . A company positioned to profit from the fun-biz boom is Major Realty ( OTC , $13.50 ) , a $12 million developer that owns 274 acres adjacent to Universal . Hotel chains are inquiring about the site , the company says . Some analysts believe that its real estate alone may be worth $30 a share . <p> Another strong tourism entry is Miami-based Carnival Cruise Lines ( ASE , $24 ) , the nation 's largest such line . Look for Carnival , with estimated 1990 revenues of $1.4 billion , to more than double its earnings in the next five years , says analyst Richard Lilly , who specializes in Florida companies for the regional brokerage JW @ @ @ @ @ @ @ @ @ @ to raise passenger capacity 50% by 1995 . SOUTHEAST OUTSIDE FLORIDA <p> This slice of the Old South -- the Carolinas , Georgia and Virginia -- will enjoy a 13% population spurt in the ' 90s . That 's not up to Florida 's dizzying 20% , but it 's almost twice the U.S. rate . The region is expected to add jobs at a healthy 1.4% a year , according to DRI/McGraw-Hill . The mild climate and below-average living costs will keep attracting companies and households from the Northeast and Midwest . <p> Southeastern regional banks , the best of which never took on many of the bad loans that crippled their cousins in the Southwest and Northeast , are a strong buy now , says research coordinator David Lee of the regional broker Robinson-Humphrey in Atlanta . The stocks remain cheap -- selling at price/earnings ratios about half those of the overall stock market -- after being knocked down in anticipation of stringent federal audits that are now partially complete , says Lee . He recommends two big regionals " that have come through their federal audits with flying @ @ @ @ @ @ @ @ @ @ ) , based in Atlanta , will have nearly $50 billion in assets when it completes a merger this fall and becomes known as Avantor Financial . NCNB ( NYSE , $36.50 ) , based in Charlotte , N.C. , with assets of $68 billion , operates throughout the Southeast and also has a large Texas subsidiary that figures to profit in the years ahead . <p> Automation has allowed the textile industry to build new plants in the Southeast . Ted Price , chief investment officer of Wheat Investment Advisors in Richmond , favors Unifi ( NYSE , $15.75 ) . With a dominant position in the market for polyester fibers , Unifi can increase prices readily . Price notes that Unifi , which acquired a major competitor in 1986 , is now financially strong enough to expand again through more takeovers . The stock is selling at a below-market 11 times the company 's estimated 1990 earnings . <p> Southeastern growth will provide business for Ryan 's Family Steak Houses ( OTC , $7.75 ) , says Robinson-Humphrey analyst Bryan Elliott . Ryan 's , with $275 million in @ @ @ @ @ @ @ @ @ @ of its 119 cafeteria-style restaurants aimed at middle-income families in the Southeast . Elliott projects 20% annual earnings growth over the next five years . <p> PHOTO ( COLOR ) : As sure as owls hoot , logging limitations in federal forests will be a boon to Weyerhaeuser , which owns twice as much timberland as its nearest competitor . <p> BY JERRY EDGERTON <p> Reporter associate : Carla A. Fried <p> RATING THE TOP 40 TOWNS <p> This table ranks the 40 largest U.S. metropolitan areas according to how well stocks of companies based in them have performed . MONEY compiled it using indexes of selected stocks from the individual cities . Each index incorporates the stocks of at least 10 major companies based within 100 miles of a city 's center . Unlike the stocks cited in the accompanying story , those here are often not rooted in their local economies . Many , in fact , have multinational operations . Ranking is by the index changes over the latest year , in most cases ending on June 30 . TABLE <p> By Jordan E. Goodman <p> 
##2018851 Section : ESTATE PLANNING Fewer people need these heavily hyped devices to duck probate costs than the promoters want you to think . To find out whether you can use a trust , read on . <p> Maybe you 've seen one of the dozens of newspaper ads placed by lawyers and financial planners urging you to attend special no charge seminars where you 'll hear about the wonders of living trusts , which allow you to pass assets to your heirs outside your will . Or perhaps you caught the 30-minute cable-TV commercial in April , " Money Makers for the ' 90s , " in which Ontario , Calif. lawyer Fred M. Cohen hawked his $.39.95 living-trust booklet cum cassette claiming that " anyone who owns a home " should have such a trust . You might even have been visited by a door-to-door salesman for one of the smooth outfits known among attorneys as living-trust factories-actually , firms that mass market trusts composed mostly of boilerplate language for $1,000 or so . <p> Why the intense salesmanship ? Simple : living trusts are easy to @ @ @ @ @ @ @ @ @ @ how to sell living trusts in less than one day , " promises an insurance magazine ad for the sales training program of American Family Living Trusts of Rancho Cordova , Calif . " Producers are now averaging over $2,000 a week . " <p> Unhappily , that boast may well be true . A custom-designed trust can cost $600 to $3,500 or more , depending on the size and complexity of your estate . Yet a growing number of middle- and upper-middle-income Americans are persuaded to spend such sums by the new marketeers . " Most people selling living trusts are aboveboard , but some of the mass-marketing groups are outright crooks , " says James Quillinan , chairman of the estate planning , trust and probate law section of the California state bar . " This is a complex legal area that requires careful drafting , planning and execution . " <p> The trusts were once used almost exclusively by the rich . Not anymore . " Avoiding probate is one of the most popular conversation topics among people over 55 , " says San Diego attorney Robert Armstrong @ @ @ @ @ @ @ @ @ @ since 1980 ) . <p> And to hear some trustmeisters talk , everyone should have a revocable living trust -- so named because you transfer ownership of assets to the trust while you are alive and can alter the document 's terms at any time . You can serve as trustee and manage the assets yourself ; after your death , a successor trustee , typically a family member or friend , will distribute the assets to your beneficiaries according to your instructions in the trust document . <p> Do living trusts ever live up to their star billing ? The answer : yes , but less frequently than their advocates claim . Proponents arc quick to point out that the trusts avoid the " evil " and the " ordeal " of probate , the legal process in which a court approves your will and supervises the distribution of your assets . While that language may be hyperinflated , the point is correct : probating an estate can take a year or longer , and legal fees and court costs often amount to 5% of the assets . Boston attorney @ @ @ @ @ @ @ @ @ @ &; Estates ( Henry Holt , $19.95 ) , estimates that a lawyer settling a $1 million estate in Massachusetts might charge $25,000 to $40,000 in probate fees , compared with $6,000 to $8,000 for settling the same estate in a living trust . <p> Proponents also argue correctly that unlike a will , a living trust will protect your family 's privacy . Once your will is admitted to probate , anyone can read it at the courthouse . But a trust document will remain secret even after the assets are distributed , except when a trustee needs a court to interpret the trust 's instructions or a beneficiary -- usually one who feels shortchanged -- persuades the court to make the documents public . ( This does n't mean , however , that you can use a revocable trust to keep assets out of your creditors ' hands . After a will is admitted to probate , creditors have four to six months to present claims to the executor for payment . With a trust , your assets can be transferred to the heirs immediately , so your creditors @ @ @ @ @ @ @ @ @ @ must sue the trustee in court or the beneficiaries if the trust has been dissolved . But since there is no time limit , such suits can be brought years after you die . ) <p> Contrary to what many trust salesmen say , living trusts do n't confer any tax benefits that a married couple ca n't get with a will . In either case , you can leave your heirs as much as $1.2 million free of federal estate taxes . You do it with a will through testamentary trusts that let you and your spouse each make full use of your $600,000 federal estate-tax exemption . Similarly , a couple can set up a living trust that splits into two trusts after the death of the first spouse . With both types , each trust contains up to the maximum of $600,000 in assets that can pass tax-free to the heirs . When the first spouse dies , his or her trust pays income to the survivor . Upon the second death , the assets of both trusts are distributed free of estate tax to the couple 's @ @ @ @ @ @ @ @ @ @ Are living trusts better estate-planning tools than wills ? The answer depends on your circumstances . Take for example Phoenix insurance broker Lou Cady , 50 . Last September , soon after he learned that his 79-year-old mother was dying of cancer , he paid a total of $1,000 to his lawyer and his investment adviser to set up a living trust for her . " We brought in deeds and stock certificates , then transferred and signed the documents , " says Cady . When his mother died in November , the trust " was a godsend . " Explains Cady : " I 've seen some heirs tied up in probate for years , but I was able to dispose of the assets as I wished . " <p> Nonetheless , for most people , living trusts are n't worth the cost and trouble . For couples whose houses are jointly owned and who have few other assets , a living trust would be " overkill , " says David Rhine , a tax partner at BDO Seidman in New York City . And a trust will be worthless @ @ @ @ @ @ @ @ @ @ to your real estate , stocks , mutual funds , bank accounts and other property . Some seminar showmen barely mention those tasks -- and an estimated 50% of people with living trusts neglect to do them . Retitling bank accounts , securities and mutual funds can require hours of work and reams of forms that must be filled out . Moreover , you 'll probably need your lawyer to retitle your house and any other real estate ( cost : about $150 a property ) . <p> The best way to decide whether a living trust is appropriate is to consult an experienced estate lawyer . In general , however , you are a candidate for a trust if one of the following applies to you : <p> The cost of going through probate in your state is high . Figuring this out is tricky . Fees for executors and attorneys vary enormously from state to state . So do court costs . In addition , states calculate the size of estates in different ways . Some include the market value of a decedent 's home ; others do n't @ @ @ @ @ @ @ @ @ @ for probate purposes at $600,000 in Texas but $1 million in California . For help in estimating your estate 's probate costs , consult the 50-state appendix in Probate : How to Settle an Estate ( Random House , $8.95 ) by Kay Ostberg and HALT , a nonprofit consumer advocacy group in Washington , D.C. In general , say estate lawyers , the probate process is particularly costly in California , New York and Pennsylvania , where total fees could top $35,000 on a $600,000 estate . For an estate of the same size in comparatively bargain states like North Carolina , Texas and Virginia , probate would run less than $16,000 . <p> Your estate is likely to prove contentious . For example , you may plan to leave a large inheritance to a second spouse , which could anger children from your first marriage . " Only rarely have embittered heirs been able to invalidate living trusts , so if your objectives could put your estate in jeopardy , you should definitely consider a living trust , " says Honolulu attorney David Larsen , author of You Ca @ @ @ @ @ @ @ @ @ @ ) . <p> You want to keep your estate private . As your estate grows more substantial , so do the benefits of nondisclosure . " You might not want the world to know that your spouse inherited $250,000 in securities , " says David Parsons , senior manager of Price Waterhouse 's personal financial services group in Morristown , N.J. " His or her name would end up on a lot of investment marketing lists . " <p> You fear becoming physically or mentally incompetent . A living trust can let you avoid a conservatorship -- that is , being placed under a court-appointed guardian if you become unable to manage your own affairs , When setting up the trust , you can provide for a successor trustee to manage your : assets if you are incapacitated . If your successor trustee is a professional at a bank or investment firm , you will usually pay an annual fee of 1% to 2% of the assets under management . Some aging couples hire a pro to begin managing the living trust while they are still vigorous . <p> If you @ @ @ @ @ @ @ @ @ @ to it , you should also have a simple will , which will cost $250 or so . One reason : only in a will can you name a guardian for your minor children . Another : you may leave assets out of your trust on purpose or by accident . Without : a will , those assets will be distributed according to your state 's laws rather than your wishes . But if you have a will with a so-called pour-over provision , the assets will automatically shift to your trust and pass the way you intend . MAJOR BENEFITS OF A TRUST ... <p> Gives you full control of your assets while you are alive and competent <p> Avoids probate costs <p> Permits assets to be distributed quickly upon your death <p> Keeps the details of your estate private <p> Arranges for a successor trustee to manage your assets should you become incapacitated <p> Is difficult to contest ... AND THE TRADE-OFFS <p> Costs more in legal fees than drafting a will <p> Requires retitling all assets that the trust will held , which can be tedious and expensive @ @ @ @ @ @ @ @ @ @ fees of 1% to 2% of assets to a professional trustee <p> Leaves your trust assets vulnerable to creditors ' claims longer than a will does <p> PHOTO ( COLOR ) : San Diego attorney Robert Armstrong extols living trusts in this 70-minute , $21.95 videotape . <p> by Marguerite T. Smith <p> Reporter associate : Andrea Coccia <p> 
##2018852 Section : SPENDING Automobile sales are down . Incentives are up . and you can knock $1,000 or more off the list price if you know the right numbers . <p> In the movie Cadillac Man , Robin Williams ' character and his car salesmen co-conspirators in sleaze raise their beer bottles in a Chinese restaurant and toast the motto of the dealership : " Nobody gets out alive . " So much for the movies . In reality , with auto sales down 10% from a year ago , most salesmen and manufacturers ca n't afford to treat their customers like prisoners anymore . That 's why this is one of the best times in years to get a great buy on a new car . Consider : <p> The average incentive is now a record $1,000 , and models such as the $15,000 Pontiac Grand Prix and the $23,000 Buick Riviera come with $2,000 rebates . <p> Ford and Honda , among others , have been quietly serving up so-called dealer incentives on some models -- factory-to-dealership payments that give sales managers leeway to move cars @ @ @ @ @ @ @ @ @ @ can even occasionally find manufacturer-sponsored 2.9% financing that carries a payment-lowering four-year term -- a relative steal compared with today 's average 11.82% car-loan rate at banks . <p> Despite these advantages , buying one of life 's most enjoyable products still ranks up there with a root canal as one of life 's least pleasurable experiences . Manufacturers are n't making the task any easier by starting and stopping their rebate and dealer-incentive programs . Chrysler , for example , just cut rebates from $1,000 to $750 on five models-Dodge Spirit and Shadow , Plymouth Acclaim and Sundance , and Chrysler LeBaron sedan -- while introducing a $500 incentive for its stretch minivans . And some dealers continue pressuring customers into buying quickly . " The car business is based on not giving the consumer the time to compare prices , " says Remar Sutton , a car dealer turned consumer advocate who designed the CarFacts buyer information program for the Credit Union National Association . <p> For the smartest advice on driving a new-car bargain , MONEY interviewed a score of industry analysts , consumer advocates , lending officers @ @ @ @ @ @ @ @ @ @ Thomas , 32 . Thomas ( pictured on page 124 ) , a service representative in the regional telephone voice-mail service of U.S. West in Denver , was told by a dealer that the 1990 four-wheel-drive Toyota Xtracab pickup truck she wanted would cost $20,000 plus $600 to $700 in add-on fees for freight and dealer handling . She flatly rejected the price , since a buyer 's guide provided by her credit union cited the dealer 's wholesale cost as a mere $14,400 . " They were trying to take me for all they could get , " Thomas recalls . Meantime , an auto broker she had consulted found her the same truck at another dealer for $15,231 -- only $831 over cost -- plus $800 in state and local taxes . Says Thomas : " I just love my truck , and the price was very reasonable . " ( For advice on how to use such a buying service , see the box below . ) <p> Auto analysts agree on this key rule for making your way through the new-car market today : keep all your @ @ @ @ @ @ @ @ @ @ , if you have one , is one deal . Financing the new car , if you wo n't be paying cash , is another . And negotiating the new-car price is one more . Car salesmen like to jumble the three together , making it harder for you to figure out your true costs of buying and financing . <p> Before setting foot in a showroom , you should decide whether you want to join the 13% of new-car customers who lease instead of buy . Leasing makes the most sense if you normally borrow when purchasing an auto and if you plan to trade in the car within five years . You wo n't get : much of a tax break for taking out a car loan anymore : only 10% of the interest is deductible this year ; starting in 1991 , none of it will be . And if you like to trade in cars frequently , a lease could allow you to cut your monthly payments for a midsize model such as the $14,000 Chevrolet Lumina by 20% to 30% compared with a car loan . @ @ @ @ @ @ @ @ @ @ the headache of selling or trading in your used car ; you simply return it to the leasing company or dealership . <p> Assuming that you 've decided to buy , not lease , these step-by-step strategies will help to keep you from getting taken for a ride in a dealer 's showroom : <p> If you plan to trade in a car , get a used-car price service to help calculate how much you can expect to receive for the auto . Once you know that number , you can determine how much money you 'll need from savings or borrowing to pay for your new car . You can get a fairly reliable estimate of your old car 's trade-in or resale value at your library , bank or credit union by leafing through the latest copy of the National Automobile Dealers Association monthly Official Used Car Guide , a pocket-size paperback . Many bookstores and newsstands sell a competitor : Edmund 's Used Car Guide ( $4.95 , published quarterly ; also available by mail from Edmund 's , 515 Hempstead Tpk. , West Hempstead , N.Y . @ @ @ @ @ @ @ @ @ @ recently introduced phone service known as Auto Priceline ( 900-999-2277 ) , which gives prices on used cars and trucks in your state . Cost : $1.75 for the first minute plus $0.75 for each minute after . You 'll probably get more for your car if you go to the trouble of selling your auto through the classifieds rather than by trading it in at a dealership . <p> Pay cash if you can ; if you ca n't , carefully analyze dealer financing or consider tapping an existing home-equity credit line . Automakers and dealers trumpet their cut-rate financing , but their lowest rates are usually only for loans that must be paid off in two years . Consequently , while the rates are great , the monthly payments are exorbitant . Such short-term deals are best avoided . One recent exception : Ford 's four-year , 2.9% loan on the sporty $12,500 Probe . Monthly payment : $249 . The other catch with below-market financing from a dealer is that if the model has a rebate attached to it , you generally wo n't be allowed to claim @ @ @ @ @ @ @ @ @ @ to choose the rebate because , as the table above shows , cutting the amount you finance reduces your total and monthly costs more than does lowering your interest rate . <p> If you must borrow , an existing home-equity credit line may be your best choice . ( Since origination fees on home-equity loans can run as high as $2,000 , it rarely makes sense to open one solely to finance a car . ) The advantages of home-equity lines for car purchases are that interest on them is generally fully tax deductible up to $100,000 and that the average rate , now 11.65% , is slightly lower than the average for auto loans at banks . Thus a taxpayer in the 28% federal bracket who wants to borrow $12,000 for a car will save roughly $800 over the life of a four-year loan by going with an 11.65% home-equity loan rather than an 11.82% loan at a bank . The tax break also makes home-equity lines $500 or so cheaper overall than a typical credit union car loan at recent average rates of 10.71% . Remember , though : @ @ @ @ @ @ @ @ @ @ house on the line if you ca n't make the payments . <p> When choosing a new car to buy , do n't overlook today 's wallflowers . Inventory costs are a car dealer 's biggest expense and , with the end of the model-year coming in September , sales managers are especially eager to unload models that are n't selling as well as they did last year . Select one -- such as the Dodge Daytona or the Pontiac Firebird -- and you could be on the road to a bargain . <p> That 's how Pirie Jones , 32 , a Los Angeles talk-show hostess on the cable-TV E ! Entertainment Television channel struck the deal that saved her $9,500 on a TC sports car ( pictured on page 126 ) , a joint venture between Maserati and Chrysler . The car , which was not burning up the sales track , carried a $33,500 sticker price and a $6,000 dealer incentive . Jones told a local Chrysler dealer she would consider buying the yellow two-seater in the lot for " under $25,000 . " Later that day she @ @ @ @ @ @ @ @ @ @ position by finding out how much dealers actually pay for the models that interest you . Here again , your library or credit union can probably help with the research . Ask to see a copy of one of the industry publications that show dealer costs for new cars and trucks . Two examples : guides from Kelley Blue Book and Automobile Invoice Service . <p> Look for a car 's invoice price -- the dealer 's wholesale cost . As a rule , the dealer expects to make a profit of 5% or 6% over invoice . But if you drive a hard bargain , you can get a new car for 3% over invoice . So consider yourself a savvy negotiator if you pay no more than $300 over invoice for a new subcompact car costing $10,000 or less ( like a Ford Escort ) , $500 over invoice for a mid-price car such as a Buick Regal at about $15,000 , and $750 to $1,000 over invoice for a $20,000-plus car such as most Cadillacs . Cars in short supply and hot sellers , including many Japanese imports @ @ @ @ @ @ @ @ @ @ pay at least $1,000 over invoice on the $15,000 Honda Accord , for example . <p> Learn what special deals manufacturers now offer on the models you like . An excellent source is the " Incentive Watch " column in the weekly trade paper Automotive News , available at credit unions and public libraries . This table notes the size and expiration dates of all rebate and low-rate financing programs offered by domestic and foreign car makers . It also shows which models have the incentives that manufacturers award dealers for unloading specific cars ; these incentives rarely appear in newspaper auto ads . Cars with such dealer incentives are perfect targets for hard bargaining , since the salesmen need your money to collect on them . Dealers will share their savings with you if you push . Currently , dealer incentives of $250 to $4,000 are awarded on an enormous selection of cars . The June 18 Automotive News " Incentive Watch " column listed dealer-incentive plans on more than 40 models , including the bargain-priced $6,000 Hyundai Excel , the $18,000 four-wheel-drive Isuzu Trooper and the $37,000 blow-your-doors-off Chevrolet @ @ @ @ @ @ @ @ @ @ any lure . Rebates , dealer incentives and financing terms have a shell-game quality . Some deals last for only a few weeks . For example , Chrysler 's generous $2,500 rebate on its Dodge Raider sports utility van is scheduled to disappear Sept. 1 . <p> Do n't let a dealer stick you with last-minute add-ons that will inflate your purchase price . If you 're not careful , a salesman can tack on as much as $1,000 worth of extras . Stoutly refuse any hard sells for supposedly necessary protections such as rust-proofing and fabric conditioner . The metal used in cars today is already treated to resist rust , and that $75 to $100 anti-stain fabric conditioner for resisting stains is overpriced , says Jack Gillis , author of the Car Book ( Harper Collins , $8.95 ) . Stand fast against paying " dealer preparation " costs -- usually $100 to $200 . These fees are already included in the invoice cost . <p> Above all , take your time . Do n't be afraid to visit five or more showrooms before committing to a car . @ @ @ @ @ @ @ @ @ @ for a Plymouth Voyager SE minivan , Linda Murray , 28 , a homemaker in Durham , N.C. , recently knocked nearly $3,000 off the $18,860 price she was originally quoted . " Taking my time was the biggest help , " says Murray . " I was not anxious . The salesmen would say : ' How soon do you want the car ? ' and then I 'd say : ' How soon do you want to sell ? ' " <p> by Jerry Edgerton <p> THE PROS AND CONS OF HIRING A PROFESSIONAL HAGGLER <p> Retired music professor Joseph Schmoll of Houston ca n't stand dickering with auto , salesmen . So when he decided to buy a 1990 Ford Taurus GL , Schmoll went to the buying service of Houston 's American Automobile Association . The AAA wangled the car for $980 below its $15.157 sticker price -- roughly $1,070 over dealer cost . While conceding that a tougher buyer might have been able to negotiate a lower price , Schmoll says : " I 'm happy . I avoided all the hassle . " Indeed , @ @ @ @ @ @ @ @ @ @ hassles -- because sometimes your own hard bargaining can get you the car you want for slightly less . <p> Most buying services work the same way . First you tell the service the exact model and color you want and pay a fee of $150 to $800 ; local AAA buying services collect their $75-per-car fees directly from dealers . ( To use an AAA buying service , you must join the organization . Cost : $18 to $65 a year . ) Then the pro typically delivers the car to you at $100 to $1,100 above the invoice price . A low-cost national auto broker called Car/Puter ( 800-221-4001 ) operates a bit differently . For $22 , the company refers you to the nearest of its 600 affiliated dealers . There you are likely to pay only $50 to $150 over invoice for a domestic model ( $300 to $600 for imports ) . Lobbying muscle by car dealers has banned auto brokers in a few states such as Maryland and Texas , but AAA and Car/Puter are exempt because buyers pick up cars at dealers . <p> @ @ @ @ @ @ @ @ @ @ If you have a car to sell , you 'll probably have to find a buyer yourself , since most services do not arrange trade-ins . And repairs may be slow if you take the car to a local dealer for warranty work . Chances are this wo n't be the dealer who sold the car , so you 'll be asking him to fix for free an auto that did n't earn him a profit . <p> SIZING UP YOUR MONTHLY PAYMENTS <p> As this table shows , reducing the amount you finance on a car loan can cut monthly payments even more than lowering the interest rate . In the first example , we assume you finance over four years $13,500 of a car you buy for $15,000 . The second and third examples assume that you get the price down to $13,800 and finance either $11,300 or $9,800 . Home-equity total payments are calculated on an after-tax basis for someone in the 28% federal bracket ; the other loans do n't account for taxes , since those write-offs will disappear in 1991 . Dealer-financing terms vary considerably , @ @ @ @ @ @ @ @ @ @ accept rebates . TABLE <p> PHOTO ( COLOR ) : Susan Thomas , here with her dogs Nikaya and Juno in the foothills of the Rockies , managed to knock about $5,000 off the $20,000 price a dealer quoted her for this 1990 four-wheel-drive Toyota Xtracab pickup . <p> PHOTO ( COLOR ) : Joseph Schmoll of Houston snared his Ford Taurus for $980 below the sticker price without having to haggle . <p> PHOTO ( COLOR ) : By speaking up , cable-TV talk-show hostess Pirie Jones convinced a Los Angeles auto dealer to let her have this slow-selling Chrysler Maserati TC sports car for $24,000 . Sticker price : $33,500 . <p> 
##2018856 Section : ONE FAMILY 'S FINANCES <p> " My business is my life , " says owner Bill Cawthon , 66 , settling happily behind a desk at his Houston Medical Supply , which retails and rents wheelchairs , hospital beds , bandages , braces and the like . " When I wake up in the morning , I ca n't wait to get to the store . " <p> Unfortunately , his son Jim , 37 , who works for Bill as assistant manager at the 5,000-square-foot emporium , does not share his father 's enthusiasm . " I 've seen him struggle on his own for 20 years , " Jim says . " The stress just does n't seem worth it , considering the amount of money he makes . " <p> There , in a few words , lies the heart of a painful dilemma involving a self-professed workaholic father and his loving but independent son . For the past 21 years , the elder Cawthon has worked to build a viable enterprise . Struggled mightily , in fact -- especially in the past @ @ @ @ @ @ @ @ @ @ of Cawthon 's dedication and skillful management , last year the business rang up all-time-high revenues of $260,000 , and Bill took $21,600 in salary plus benefits . <p> Despite being groomed by his father to take over Houston Medical Supply , however , Jim does n't want the business . Neither does the only other child , Linda , the 42-year-old wife of an Air Force major who lives in Austin . As a result , Bill -- who has health problems and wants to retire with his homemaker wife Irene , 62 -- would like to sell his firm . Asking price : $225,000 , an aggressive figure that Bill arrived at by applying an accepted but generous business formula of the replacement value of the store 's assets plus inventory and good will . <p> Because of the stiff pricing and Houston 's still-soft economy , the store has gone unsold for two years . " That puts us in a bind because it 's our one asset for retirement , " says Bill . Like many small entrepreneurs , he funneled most of his earnings back into @ @ @ @ @ @ @ @ @ @ up to only $22,000 -- far below the $200,000 or so that most financial planners recommend for retirees of Bill 's age , income and spending habits . <p> Wrenching generational conflicts like the Cawthons ' are being played out all across the country as parents who benefited from postwar prosperity try to leave their businesses to kids who have their own dreams . More than six out of 10 U.S. companies are family owned or controlled , including a third of Fortune 500 corporations . Yet experts estimate that only 33% of family businesses are successfully handed down to the second generation , and just 15% pass into the hands of the third . More often , they are sold or liquidated instead . Notes Peter Davis , head of the Division of Family Business Studies at the Wharton School in Philadelphia : " Many business owners simply fail to plan adequately for succession . " One reason , adds Stewart Friedman , a professor of management at Wharton , is that " the qualities that make a great entrepreneur -- boldness and daring -- are often incompatible with the @ @ @ @ @ @ @ @ @ @ retirement . " <p> Unlike more freewheeling entrepreneurs , Bill at least attempted to make a succession plan -- and for many years Jim thought that he wanted to go along with it . Except for a short stint as a carpet salesman in Houston in 1976 , he had never worked anywhere but the store since starting as a delivery boy in 1970 . In 1977 , at Jim 's request , his father gave him 30% of the firm 's stock to establish him as heir apparent . When Jim finally took over , Bill and Irene figured , the business would finance their retirement through a long-term stock purchase plan that would pay them about $1,300 a month . <p> But two years ago , Jim concluded that his easygoing personality was not suited to flying solo . " As I got older , I realized that I need a team around me and a boss to make the final decisions , " he explains . Letting his father know was difficult ; Jim thought about the decision for more than a year before breaking the news during @ @ @ @ @ @ @ @ @ @ Medical one spring afternoon in 1988 . His father 's reaction ? " He was very accepting , " says Jim . " I still feel badly , but it would have been worse to go along with the plan . I could n't let my parents ' retirement depend on my willingness to run a business I did n't want . " <p> Although Bill and Irene support his decision , it plunges their plans for the future into doubt . " We were disturbed , " Bill admits . " I would have been happier to think that the business would have been carried on by Jim , since it could have ensured the family 's livelihood . " Still , Jim 's change of heart was not a total surprise . " We saw it coming over the years , " Bill recalls , partly because he recognized that his son 's personality in many ways resembled his own late father 's . " My dad could never have run a store either -- he would have worried himself to death . " <p> Now Bill and Irene @ @ @ @ @ @ @ @ @ @ Irene : " We really want Jim to do what will make him happy , but he does n't seem to know what that is . " Adds Bill , half-jokingly : " Jim is a child of the atomic age -- he does n't want to worry about tomorrow because he figures the world might end . " <p> Their son , in his characteristic laidback way , is pondering his options . " As a transitional step , I will probably look for a job at another medical supply company , " says Jim , who should receive $30,000 to $40,000 for his stock . But " it will be hard working for someone else since I 've had it so easy with my father . " <p> Bill and Irene had nothing like that good fortune . The couple met in March 1945 while enrolled at a business college in Birmingham . By September , they were married . Bill got a job as a receiving clerk at a local medical supply company and loved it . From that point on , his dream was to run his @ @ @ @ @ @ @ @ @ @ after moving to Houston , that Cawthon and a colleague set up an over-the-counter retail medical products business while still working for a company that sold health-care supplies to commercial clients . By 1971 , the small firm was earning enough to pay one $900-a-month salary , and Bill quit his job in the spring to labor there full time . <p> A month later , he fractured his right leg falling off a shelf at the store . While he was in the hospital , his partner , who feared that the business would go under with no one to run it , demanded to be bought out . Bill left the hospital five days later -- against his doctors ' advice -- and managed to find a buyer for his partner 's stock . But as a result , his leg healed badly , and he has walked with a slight limp ever since -- a visible reminder of his single-mindedness . <p> In 1974 , Bill acquired the operation free and clear , and since then he has run his own show -- putting in 10-hour days seven @ @ @ @ @ @ @ @ @ @ here and there . His only prolonged absences occurred when he had a heart attack in ' 79 and coronary bypass surgery in ' 82 . Although Jim and two part-time workers help , Bill , like many entrepreneurs , does not like to delegate ; he keeps a close watch on everything from floor displays to sales receipts to deliveries . " I 'm comfortable only when I 'm the one making the decisions , right or wrong , " he says . " I can be pretty bullheaded . " So far this year , his attention to detail is paying off : sales were up 10% in the first quarter to about $59,000 . <p> Despite Bill 's drive and ability , the Cawthons find themselves caught short financially . Their liquid assets consist of only $1,800 in a bank checking account and $20,000 in certificates of deposit paying 8% to 8.5% . That amount includes a $10,000 down payment they received when they sold their three-bedroom contemporary house earlier this year for $48,650 in anticipation of their retirement ; the buyer assumed the Cawthons ' $27,000 mortgage @ @ @ @ @ @ @ @ @ @ pays them $162 a month . Right now , the couple rent a two-bedroom apartment in a quiet condominium complex in West Houston for $750 a month . <p> Of course , their financial problems would ease considerably if Bill could find a buyer . Last year , he listed Houston Medical Supply with a business broker , who told him it should be priced at $175,000 , not $225,000 . Bill disagreed . " He was n't giving me full value for the depreciated merchandise or the good will our store has built up over 20 years , " Bill complains , adding that he serves second- and third-generation customers . He has had several offers , including one for $200,000 . But he 's rejected them all , often because buyers wanted him to offer financing that he considered too risky . <p> For the past few months , Bill has been trying to sell the business himself through industry contacts . He is also seeking to increase revenues 40% to ensure a better price . One strategy that he 's considering is to start accepting Medicare payments for @ @ @ @ @ @ @ @ @ @ He can earn gross profits of 51% on sales , but rentals eventually bring in more , since equipment , such as wheelchairs , can be reused and later sold at a discount . He 's never taken Medicare reimbursements before because of the system 's cumbersome pricing restrictions and its reputation for refusing payments . Still , as he readily admits , the decision has cost him . <p> While waiting for a buyer , the Cawthons are researching retirement locales . One possibility : Florida 's booming Gulf Coast , which they have recently visited . " Wherever we live , I think it 's important that we stay busy exploring or taking classes , " Irene says , adding that she 'd like to do some landscape photography . " We 'll need to keep occupied since we are n't used to being around each other all day , " she adds jokingly . <p> Staying busy ? No problem . Although Bill talks of taking up fishing again , a hobby he forsook 35 years ago , he knows that workaholics find it hard to reform . @ @ @ @ @ @ @ @ @ @ to fix medical equipment or maybe to sell a line of products , " he says , smiling . " I 've worked all my life , and I just ca n't see stopping now . " THE ADVICE <p> THE PROBLEMS : To sell their small business at the best possible price and invest for retirement <p> THE SOLUTIONS : Create a personal holding company to reduce taxes , boost sales in the business and invest through mutual funds <p> MONEY asked Houston C.P.A. Allen McGee of McGee &; McGee , financial planner Katherine Sandberg of Sandberg Financial Services and Nicholas Sarantakes , a business instructor at Austin Community College , to counsel the Cawthons . Their chief recommendations : <p> Selling the business . McGee warned that Bill may be pricing his business too high at $225,000 . Based on its net worth and annual profits , McGee figures Houston Medical is worth only about $170,000 . He suggests a more flexible sales approach . " Price the business lower but ask for a percentage of sales over $200,000 a year , " he says . " That way @ @ @ @ @ @ @ @ @ @ projections . " <p> McGee adds that the Cawthons could face a stiff tax bill . " Most small businesses are sold on an asset basis , " he says . " That means the owner can be taxed twice -- once on a corporate level , when the assets are sold off , and then on the individual level , when the owner gets paid for his stock . " Owners , of course , try to arrange the sale as a stock-only deal , on which they 'll be taxed once . But most buyers refuse to go along , since such a transaction does not permit them to take advantage of the tax break they could get by depreciating the assets based on the sale price . Even with an asset sale , though , Bill may be able to reduce taxes by having Houston Medical retain and invest the after-tax profit from the sale rather than hand it over to him . The company would then pay Irene and him dividends -- thus making it possible for them to defer capital-gains tax on the stock and enjoy @ @ @ @ @ @ @ @ @ @ a better price for Houston Medical , Bill should start taking Medicare payments for rentals , says Sarantakes . He should also hire a salesman to call on nursing homes and hospitals . " You could look for a retired industry executive who would work on commission , " Sarantakes says . Another marketing possibility : give discounts to groups like the American Association of Retired Persons . <p> Retirement planning . If the business sells for $225,000 with financing from Bill and Irene as expected , Sandberg says , they might eventually receive approximately $30,000 cash after taxes plus installment payments of $1,766 a month for 19 years . With their other investments and Social Security , their annual after-tax income would be $27,000 . But if the business sells for $170,000 , their income might be only $24,000 . " That would still be livable , though , since they are not big spenders , " she says . " They would still have excess cash flow of about $200 a month . " <p> Some of that money should go toward building an emergency fund of about $10,000 @ @ @ @ @ @ @ @ @ @ a supersafe money-market fund . One solid choice : Dreyfus Worldwide Dollar ( 800-645-6561 ) , recently yielding 8.9% . But on a fixed income , the Cawthons will need to seek even higher payouts . Sandberg 's advice : place about $25,000 of their expected cash payment in an investment-grade bond fund . " You can earn higher yields than in a money-market fund or CD , " she notes . " And investment-grade bonds are also fairly safe . " Her top choice is one of MONEY 'S recommended funds ( see page 50 ) : Bond Fund of America ( 4.75% load ; up 10.1% for 1989 ; 800-421-9900 ) , recently yielding 9.9% . In addition , the Cawthons will need to invest for growth to protect themselves from inflation . Sandberg recommends an equity-income or growth and income fund , such as Washington Mutual ( 5.75% load ; up 28.9% ; 800-421-9900 ) or Fidelity Puritan ( 2% load ; up 19.6% ; 800-544-6666 ) . <p> Bullheaded as usual , Bill disagreed with McGee about his shop 's price . But he liked the notion @ @ @ @ @ @ @ @ @ @ the sale , and both he and Irene have begun researching bond and stock funds for their retirement portfolio . A BUSINESS ON THE BLOCK TABLE <p> PHOTOS ( COLOR ) : Bill ( left ) enjoys working at his store on tasks like wheelchair repair , but Jim ( above ) , an avid bicyclist , has decided to reject the family business . <p> PHOTO ( COLOR ) : While awaiting the sale of the business , Bill and his wife Irene ( middle ) are renting a two-bedroom condo , where they often dine with Jim . <p> BY PENELOPE WANG <p> 
##2018857 Section : SPENDING MONEY ranks the 15 greatest eating-out cities and guides you to their top tables . The best of the best : Los Angeles . <p> Not long ago the U.S. food map was a variation on the celebrated New Yorker magazine cover : a huge , deliciously detailed Manhattan filled the foreground , set off by a hinterland of boring plains . The Hudson River was the Continental Divide , and most restaurants unlucky enough to be west of it were obviously hash houses or , at best , surf-and-turf parlors . If you looked hard , you could detect a faint glimmer of culinary life in New Orleans ( dinner at Antoine 's ) and San Francisco ( dinner at Ernie 's ) . The rest was void . <p> How times have changed . America 's gastronomic landscape started to shift in the ' 70s , with Julia Child , goat cheese and the yuppie onslaught that together raised the collective consciousness to palate level . Now good to great restaurants are sprouting everywhere like shiitake mushrooms after a summer rain . <p> @ @ @ @ @ @ @ @ @ @ travel on business or pleasure , MONEY set out to rank the top restaurant towns in America . Our most striking discovery : New York has been displaced by Los Angeles as the culinary capital of the U.S. But that is n't the only surprise : There are now four world-class eating cities in the U.S. where every night of the week restaurants are serving dinners equal to those of the best in Paris -- Los Angeles , New York , San Francisco and Chicago . The big news , aside from L.A. 's pre-eminence , is the mighty leap of Chicago into this elite league . <p> New Orleans , once second only to New York as a food town , has been surpassed by cities that were gustatory backwaters not long ago , such as Boston and Washington , D.C. <p> While not yet in the first rank , there are undiscovered regional stars , such as Philadelphia and Phoenix . <p> MONEY 'S ranking of the 15 best cities can be seen at a glance in the table on pages 126 and 127 . Selection and order are @ @ @ @ @ @ @ @ @ @ of food available ; local standards of service ; and price . To be included , a city had to demonstrate a range of excellence . Thus for each city in our ranking , we have identified the most notable restaurants in two categories : 1 ) top-of-the-line restaurants , which are the most ambitious in terms of food and are also usually the most expensive . These are the kinds of places you would seek out for important business occasions , wedding anniversaries , birthdays -- or just ethereal eating experiences ; and 2 ) specialty restaurants , such as seafood houses and the ethnic standouts that spice the food scene in every serious eating city . The latter tend to be more casual places suitable for informal meals . <p> MONEY 'S judgments on this clearly subjective topic were rigorously arrived at . First , with the assistance of Nancy Harmon Jenkins , a respected food writer-editor and a six-year veteran of the New York Times , we recruited professional food critics in 23 cities to evaluate their respective towns . To get a national perspective , we interviewed @ @ @ @ @ @ @ @ @ @ amateur eaters with up-to-date knowledge of the U.S. restaurant scene . Then we made our evaluations . Here is a closer look at our ranking : NO. 1 : LOS ANGELES . EAST-WEST IS BEST <p> As the U.S. grows more multinational , a dazzling stir of European culinary discipline , exotic Asian lightness , Latin brio and terrific local ingredients is taking root as the new American cuisine . And right now the place to indulge yourself with this exciting restaurant food is Los Angeles . <p> Why L.A. ? Four reasons : its soaring wealth as the financial capital of the West ; its closeness to the most bountiful source of superfresh fruits and vegetables ; its reasonable prices , thanks to retail rents that are of ten about half those in New York ; and its position as a new golden gateway for immigration . Furthermore , not all the immigrants have been from the South and West . La-La Land 's zany vitality and Mediterranean climate have attracted brilliant chefs from frigid northern Europe looking for an anything-goes atmosphere in which to experiment with their craft . @ @ @ @ @ @ @ @ @ @ , the most celebrated chef in America today . Compact and earthy , Austrian-born and French-trained , Puck , 40 , burst through the smog eight years ago with Spago , the first of his four restaurants , where he introduced " designer pizzas " topped with shrimp and leek , and daring East-West combinations like sauteed fois gras with sweet-and-sour plum sauce . <p> Today Spago remains an important L.A. food shrine , as well as a place to see and be seen . But Puck has outdone himself . His second effort , Chinois on Main in Santa Monica , is the best current eating spot in all of L.A. , and perhaps in all of America . <p> At Spago you may wait till 10 o'clock for your 9 p.m. table in Siberia ( the back room ) -- or , if you 're lucky , in what the Los Angeles Zagat Restaurant Survey , one of 19 city guides published by Zagat Survey , terms the " staggeringly noisy " front room . Chinois on Main , by contrast , offers " more consistent food , definitely @ @ @ @ @ @ @ @ @ @ view of MONEY 'S Los Angeles critic Charles Perry , a restaurant columnist for the Los Angeles Times . <p> The major influence at Chinois on Main is Chinese , but a strong European influence is at work . You might start with grilled mandarin beef with spicy Chinese potato salad , then move on to Shanghai lobster risotto with ginger and a julienne of green onions . Desserts are unabashedly Occidental state of the tart -- rich chocolate cake , parfait of the day -- and accompanied by an espresso that could pass muster on the Via Veneto . ( A three-course dinner before tax , tip and wine averages around $90 for two . ) <p> The other current local star is Michel Richard , whose Citrus is viewed by some foodies as even better than Puck 's places . Richard , 42 , born and trained in France , also dares to be different but in a mostly French context . Try the sea scallops pierced through with tender young asparagus on a bed of creamy whipped potatoes spiked with black olives and surrounded by an intense lobster @ @ @ @ @ @ @ @ @ @ wheat polenta and a truffle sauce . Desserts from this master pastry chef are not to be missed , like the creme brulee napoleon with butterscotch sauce and vanilla ice cream . ( Three courses : about $86 for two ) <p> When you 're ready to descend to the merely fine and affordable , you encounter a true kaleidoscope of ethnic influences . Samples : <p> The Border Grill , with its Yucatecan specialties such as fabulous green corn tamales and bounteous exotic salads . The original one on Melrose Avenue , a kooky extravaganza of small retailers , is a perfect lunch oasis . The Santa Monica branch is a better choice for dinner . ( Three courses for two : $60 ) <p> The Fragrant Vegetable , a Chinese vegetarian haunt where you can delve into such inscrutables as Buddha 's cushions , thin sheets of tofu surrounded by black moss , and sweet white fungus-and-coconut soup . ( Three courses for two : $40 ) <p> The Grill on the Alley in Beverly Hills , with a woody , men's-club setting , crusty steaks , A-plus cobb @ @ @ @ @ @ @ @ @ @ the West . ( Three courses for two : $76 ) NO. 2 : NEW YORK . SEA OF CHOICE , SKY OF PRICE <p> Sheer , unrivaled force of numbers is what keeps New York at the top of so many experts ' lists of restaurant towns . What knocks it down to second place in MONEY 'S ranking is summed up by Joshua Wesson , coeditor of the bimonthly Wine &; Food Companion : " New York 's very culinary strength is also its biggest weakness -- while there 's a tremendous amount of diversity in dining to be found among its 22,000 or so eating places , much of it is n't worth discovering . " Even in Manhattan , the borough that the visitor means when he says New York , the vast majority of restaurants serve unexciting fare . <p> One explanation for all this rampant mediocrity : high Manhattan rents force all but the best restaurants to skimp on the quality of their food . Laments William Rice , Food &; Wine 's former editor who now writes for the Chicago Tribune : " Real @ @ @ @ @ @ @ @ @ @ has faded somewhat as the incredible panorama of restaurants of different cultures . You just ca n't afford to open a little restaurant in Manhattan anymore . " The city 's restaurateurs who do n't pass along their high costs in the form of lowered quality may instead decide to add them to the tab . Even though the 1987 stock market crash has brought on a price-cutting frenzy at many trendy bistros , the average price for a fine meal in New York is nearly half again as expensive as in Los Angeles : $61 vs. $43 . ( See the table opposite . ) <p> So why bother ? " There 's still no other city that offers as many shots at culinary epiphanies as New York , " says Wesson .. " The trick is to find the places that are treats without suffering along the way . " <p> Fewer than two dozen restaurants currently form the hot center of excitement in New York -- not for their decor or views or famous faces at table but because the most talented and innovative chefs are cooking there @ @ @ @ @ @ @ @ @ @ Chef : Thomas Valenti ; style : southwestern French ; signature dish : braised lamb shank with pureed white beans on a bed of wilted chicory ( $80 for two , without tax or tip ) . <p> Bouley . Chef : David Bouley ; style : French ; signature dish : roasted halibut with toasted sesame ( $140 ) . <p> Le Bernardin . Chefs : Gilbert Le Coze and Eberhard Mueller ; style : French seafood ; signature dish : roast monkfish on Savoy cabbage ( $136 ) . <p> Union Square Cafe . Chef : Michael Romano ; style : American/Italian ; signature dish : warm seafood salad with white beans ( $80 ) . <p> You say that some of the above prices seem exorbitant , even for an epiphany ? Just wait until tax ( 8 1/4% ) , tip and a bottle of wine are added : dinner for two at , say , Le Bernardin -- where the wine list is undeniably overpriced -- can easily approach $300 . ( If you go , a bottle of the ' 86 St. Aubin at $40 @ @ @ @ @ @ @ @ @ @ on the less expensive end of the hot-chef list , your complete bill for two need n't run above $140 or so , and you 'll find two lagniappes : excellent wines by the glass and a friendly welcome in a city where many celebrated restaurants display an attitude toward unknown diners calculated to freeze the Panama Canal . <p> As for the best specialty restaurants , unlike most cities , in New York this category is no guarantee of bargain prices . Arqua , an open , airy restaurant on the arty fringe of Wall Street , exacts about $68 for three courses for two of its excellent northern Italian fare . Sparks , a traditional , masculine steakhouse ( where at dinner , the air can turn blue with cigar smoke ) , boasts one of the most impressive wine lists in the country , with 300 entries and reasonable pricing ( three courses : $88 ) . For variety , Chicago wins . Its middle-European scene is unique . <p> When your budget begins to scream and you no longer need to impress anyone , head for the @ @ @ @ @ @ @ @ @ @ the best Cantonese food in the city . You can bring your own wine and get away for less than $50 for two . NO. 3 : SAN FRANCISCO . PASSION FOR PERFECTION <p> Were it not for its smallness -- at 749,000 , its population is a fourth of L.A. 's and a tenth of New York 's -- San Francisco would probably equal or even surpass both its rivals for top restaurant city . " It 's got a European sensibility and takes inspiration from the land around it , " enthuses the Chicago Tribune 's Rice . " In New York the pressure to excel comes from a sophisticated , well-to-do clientele ; in San Francisco it comes from this extraordinary food and wine community that cares passionately . " Los Angeles Times food editor and restaurant critic Ruth Reichl gives the perspective from down the coast : in L.A. restaurants , they tell you which stars came in to eat ; in San Francisco , they tell you the name of the farmer who grew the potatoes . <p> If a trip to the Bay Area coincides @ @ @ @ @ @ @ @ @ @ then you may want to mark it at the best table in town : at Masa 's , a richly quiet , dark-wood-paneled room tucked away in a small hotel on Bush Street . You may decide that the new wave French food there is just about the best you 've ever had . Jeannette Ferrary , MONEY 'S San Francisco critic , chooses one appetizer as a sample of the style : black sea bass sauteed under a mosaic of crisped , tiny rounds of sliver-thin potatoes and served with baby cucumbers with their flowers attached and a red-wine beurre blanc . San Francisco Chronicle columnist Herb Caen dotes on " the best creme brulee ever bruleed " at Masa 's . Some irrepressible brulee fans drop by late for this masterful example of a familiar dessert ( $8.50 ) accompanied by a Chateau d'Yquem , offered by the glass ( $35 ) . A memorable repast at Masa 's , price-fixed at $65 a person , could easily cost two people $300 counting tax , tip and bottle of wine . <p> Few other San Francisco restaurants are in @ @ @ @ @ @ @ @ @ @ , for that matter ) . At Roti , a handsome new spot featuring meats spit-roasted in a giant fireplace in the dining room , three courses for two would come to $54 . At China Moon Cafe , an imaginative menu can take you through Chinese , Thai and Italian influences before you wind up with a homemade French nut tart ( $56 for two ) . NO. 4 : CHICAGO . EXTRAVAGANTLY ETHNIC <p> Variety is Chicago 's spice : according to Zagat , it has 61 types of cuisine vs . New York 's 65 , with less than half the population . Among the city 's 9,600 restaurants is the familiar , solid center serving middle-European fare -- German , Polish , Czech , Hungarian -- that no other American city can duplicate . But in recent years , ring upon ring of other ethnic cuisines have surrounded this core , lightening , brightening and complicating the Chicago scene . The new entries include some of the most impressive Mexican restaurants this side of the Rio Grande and the best new wave American east of the Rockies @ @ @ @ @ @ @ @ @ @ else can you find so many excellent examples of so many of the world 's cuisines ? " asks Dennis Ray Wheaton , chief dining critic for Chicago magazine . <p> Chicago 's top special-occasion destination : the Everest Room . From 40 stories above LaSalle Street , this aerie defies not gravity but a basic rule of restaurants : that good views and good food do n't go together . Chef Jean Joho 's Alsatian roots show up in his remarkably light touch with earthy vegetables like potatoes and cabbage , often accompanying delicate seafood sausage or wild salmon . The 200-item wine list includes 40 Alsatian whites ( $92 for two ) . <p> The city 's amazing culinary diversity is best reflected in its specialty restaurants . Among them : <p> Terczak 's , where rich chowders and fish soups , hearty pot roasts and other American classics turn out far better than those back in 19th-century farmhouses . ( $50 for two ) <p> Mareva 's , which evokes lost aristocratic Poland , with tuxedoed waiters , plush banquettes , huge brass chandeliers , beveled mirrors , @ @ @ @ @ @ @ @ @ @ pierogi , followed by a lusty loin of braised venison. ( $70 for two ) <p> Frontera Grill and Topolobampo , a double-sided establishment ( the Grill is more casual and less expensive ) , that is " arguably the best Mexican restaurant in the United States , " says Wheaton . " Wood-grilled " meats , vegetables , and beans and rice come in guises a world removed from the cliched Mexican food most of us are familiar with " ( $40 for two ) . <p> Jane Stern , who with her husband Michael writes about food and popular culture for the New Yorker , puts Chicago at the top of her eating-out list ( as does he ) . " I love the bigger-than-life expansiveness of Chicago restaurants , " she rhapsodizes . " There 's always plenty of elbow room , the portions are large , the seats are big ; you even get big glasses of water . And of course , the waitresses are loud . " NOS. 5 TO 15 : THE REIGNING REGIONALS <p> Washington , D.C. ( No. 5 ) has been @ @ @ @ @ @ @ @ @ @ Salinger emerged on the scene during the Kennedy Administration . That advent produced some French and Italian restaurants with four-star reach . Some exacting eaters -- Los Angeles Times media critic and GQ dining-out columnist David Shaw for one-consider Jean-Louis the best French restaurant in the country . In addition , according to Washington Post food critic Phyllis Richman , " Washington is the city that first gets the culinary fallout from the world 's trouble spots . " That explains its lush concentration of good and very good Thai , Vietnamese , Ethiopian , Salvadoran and Afghan restaurants . <p> Seattle ( No. 6 ) has moved farther faster than any restaurant city aside from Los Angeles . It may well be the most exciting place to eat fish and shellfish in the entire U.S. Observes Schuyler Ingle , MONEY 'S critic there : " The diner from New York or Los Angeles will find himself laughing behind his napkin for the magnificent food he has just eaten at such absurdly low prices . " The Hunt Club , all dark wood and lithographs of hunting scenes , offers the @ @ @ @ @ @ @ @ @ @ West 's most talked-about young chefs ( $66 for two ) . <p> Boston ( No. 7 ) is Seattle 's East Coast competitor for top seafood town . Its culinary fame is at the high end , however , with a scarcity of mid-range restaurants that are worth any sort of detour . Jasper 's enjoys a harborside location and perhaps Boston 's best-known chef , the eclectic Jasper White ( $72 for two ) . <p> New Orleans ( No. 8 ) , that unique mecca of Creole and Cajun specialties , still has its champions , but the facts are cruel : it is no longer a wealthy city capable of supporting many fine restaurants without relying on the kindness of strangers . Some of its oldest names -- Antoine 's and Brennan 's , most notably -- have lowered their standards and cater to tourists by the busload . Complains Gene Bourg , New Orleans Times-Picayune restaurant critic : " People who have lived here all their lives are now subjected to waiters from California taking the liberty to explain what a gumbo is . " Still @ @ @ @ @ @ @ @ @ @ Orleans high marks principally for its regional and seafood specialties . Galatoire 's is one turn-of-the-century New Orleans bistro that has not sold out ( $50 for two ) . <p> Among the lower-ranking cities -- Philadelphia ( No. 9 ) , Dallas ( 10 ) , Miami ( 11 ) , Minneapolis ( 12 ) , Houston ( 13 ) , Atlanta ( 14 ) and Santa Fe ( 15 ) -- some of the most knowledgeable critics we consulted mark Philadelphia as the sleeper . It boasts a vast midsection of inexpensive Italian and Oriental spots , plus some of the most celebrated haute cuisine in the country . In fact , Zagat designates Philadelphia 's Le Bec-Fin as the No. 1 rated restaurant for food in its entire 19-city survey . <p> Finally , there are six cities that are not yet culinarily accomplished enough to be ranked among the best but are getting there : Cleveland , Denver , Phoenix , Portland , Ore. , San Diego and Tucson . Now may be the time to dig into these third-tier towns , while they are still relatively @ @ @ @ @ @ @ @ @ @ It 's the strongest of the six , and a topflight meal there -- say , at Vincent Guerithault on Camelback ( 602-224-0225 ) -- will cost a fourth less than what you 'd spend at the best in supernal L.A. HERE 'S WHERE NEW YORK IS THE TOPS ... TABLE <p> PHOTO ( COLOR ) : Sizzling sea scallops at Chinois on Main ; Citrus ' snails in potato crust <p> PHOTOS ( COLOR ) : Two reasons why Los Angeles is running away with top food honors : Chinois on Main ( above ) , where star chef Wolfgang Puck , in the foreground , creates dazzling East-West fare ; and Citrus ( at left ) , where the enclosed patio is the place to sit and enjoy the inventive French menu of chef Michel Richard <p> PHOTOS ( COLOR ) : Union Square Cafe is one of Manhattan 's friendliest -- and best -- restaurants . At San Francisco 's Roti , birds are spit-roasted at a hearth in the main room . <p> PHOTOS ( COLOR ) : Filet mignon of tuna with grilled eggplant at Union @ @ @ @ @ @ @ @ @ @ ( COLOR ) : Upper-crust Polish cuisine is served in a candlelight-and-Chopin setting at Mareva 's , a Chicago Old World gem and one of its many East European eateries . <p> PHOTOS ( COLOR ) : Chrusty , a Polish confection , and owner Irena Idzik greet guests at Mareva 's , where the borscht with yogurt is shocking pink . <p> BY JOSEPH S. COYLE <p> WHERE THE TOP MEALS ARE <p> Here is a guide to America 's 15 finest restaurant cities , ranked in descending order . Restaurants are recommended by MONEY 'S food critic in each city . The top places are appropriate for big-occasion dining ; the less formal specialty spots and best-kept secrets tend to feature ethnic and regional cuisines . <p> Per-person dinner prices are for three courses , not including tax or trip . The letters after the phone numbers indicate types of food served ; see the footnotes for a key to the codes . TABLE <p> Compiled by Deborah Lohse <p> 
##2018860 Section : Editor 's Notes <p> Around 9 p.m. on June 9 , 1988 , Alex Council made the business decision of his life . He and his wife Kay had been fighting the Internal Revenue Service for five years over a tax bill that had grown to $289,282 . The court date was still months away and , now , finally , he was broke . He could n't afford a lawyer any longer . At 49 , he was about to lose his home and business in front of friends and family in his hometown of Winston-Salem , N.C. <p> Council slipped on his light-blue windbreaker to protect against the night chill , walked to the woodpile behind his house , put a steel-blue .38-caliber pistol in his mouth and squeezed the trigger . <p> When Kay got home from bingo about two hours later , she was going to " fuss at him " for leaving all the lights on . Then she noticed the handwritten note on yellow legal paper : " My dearest Kay -- I have taken my life in order to @ @ @ @ @ @ @ @ @ @ which have been taken against our property illegally by a runaway agency of our government have dried up all sources of credit for us . So I have made the only decision I can . It 's purely a business decision . I hope you can understand that . -- I love you completely , Alex . " <p> A postscript said she could find his body on the north side of the house . " I could n't move , " Kay said . " I kept thinking , ' Where the hell is the north side of the house ? ' I did n't know . <p> " If I had gone and found him then , I probably would have shot myself . " <p> What began as a routine audit of a questionable tax shelter in 1979 had been transformed by the IRS ' bungling and the Councils ' stubbornness into a tragedy . Something went horribly out of control . <p> Some people would like you to think that Alex Council , an accountant by training who became a small real estate developer , was a @ @ @ @ @ @ @ @ @ @ partner , Preston Martin , the former vice chairman of the Federal Reserve Board , remembers him fondly as " brilliant , honest and well balanced . " <p> Kay Council wants you to believe that the IRS could destroy your family just as it crushed her , her husband of 14 years and their four children . <p> Who 's right ? The facts are these . You decide . <p> When the IRS audited the Councils ' 1979 return , the examiner made it clear that she was going to disallow a $70,000 art-lithograph tax shelter . Three years passed , however , before either the couple or their accountant received a notice of tax due . And then it arrived five months after the three-year statute of limitations on tax assessments had expired . IRS officials insisted that two earlier letters had been sent to the couple , including a critical notice of deficiency 20 days before the statute deadline . The IRS said the couple had to pay up . By then , with interest and penalties , the bill was $183,021 . <p> The Councils spent @ @ @ @ @ @ @ @ @ @ to prove the agency had messed up the first two notices and they owed nothing . Their case was shunted from one officer to the next before they finally took it to U.S. District Court in 1987 , as the tax bill approached $300,000 . When a judge granted the IRS a further delay to gather evidence , Alex snapped . <p> Following meticulous instructions her husband left behind in a 45-minute tape recording , Kay used the $250,000 she collected on his life insurance to finance the lawsuit . In court , the IRS ' certified-mailing list , the proof of notice the couple had sought for years , showed that some staffer back in April 1983 had typed the wrong address . The Councils lived then at 71 Corte Del Bayo , Larkspur , Calif . The IRS apparently sent the notices they never got to 7 +/- Corte Del Bayo . The lawsuit rested on that one errant keystroke ; the Councils were victimized by a typo -- the kind of error that MONEY warned of in our April cover story , " The IRS Mess . " @ @ @ @ @ @ @ @ @ @ had told the couple they would be sent a bill for additional taxes , they should have got in touch with the agency when the bill did n't arrive . Judge Frank Bullock slapped that down . The tax code , he ruled , " does not place upon plaintiffs the burden of hounding the IRS for delivery of a possible notice of deficiency . " He canceled the entire $289,282 tax deficiency and revoked the lien against her home . Kay did n't owe the IRS a cent . Moreover , Bullock ruled that the IRS owed her money -- $27,971 for her legal fees , the maximum allowed . <p> Despite the victory , Kay remains angry . Seated in the $75,000 " cracker box " townhouse where she lives alone now , she said , " I had to prove we were not guilty in court before anyone would listen to me . Who else besides the IRS can say you 're guilty , and that 's it ? What gives them all the rights , and I have none ? Somebody should be held accountable . At @ @ @ @ @ @ @ @ @ @ to me : I 'm sorry . We made a mistake . ' " <p> Three days later , when MONEY interviewed Goldberg in Washington : D.C. , the normally forthright commissioner found himself in a difficult position . Kay Council has refused an IRS request to surrender her right to keep 12 years of tax returns private . Without her waiver , he can not comment on her case directly . Still , the reporter asked , when a judge rules emphatically for a taxpayer and awards legal fees , should the IRS apologize as a matter of policy ? <p> " We do apologize , " said Goldberg pointedly , " when we think the taxpayer deserves one . " <p> His press assistant , Ellen Murphy , who was monitoring the interview , added , " A judge 's ruling is not proof that the IRS made a mistake . " <p> The reporter persisted : " Kay Council wants to know why you did n't apologize . Why did n't you ? " <p> " I have expressed sorrow about her case , " Goldberg answered , @ @ @ @ @ @ @ @ @ @ tragedy . Do I wish it had n't happened ? Sure . Do I wish somehow it got fixed ? Of course . In that sense , yeah . " <p> PHOTO ( COLOR ) : Kay Council <p> PHOTO ( COLOR ) : IRS Commissioner Fred Goldberg <p> By Frank Lalli , Managing Editor <p> 
##2018862 Section : TAXES <p> First you panic . Then you feel guilty . No matter how honest you are , your heart sinks when you get a letter from the Internal Revenue Service , as I did six months ago , announcing that you 've been targeted for a TCMP audit -- one of those killer audits from . C.P.A. hell . <p> The full title of this refined form of torture is the Taxpayer Compliance Measurement Program audit . Every three years , IRS computers pluck out roughly 55,000 tax returns at random for the TCMP -- one in 2,000 of all 110 million returns . Unlike a regular audit ( of which there were 984,643 last year ) , where you must only provide proof of items that the IRS finds suspect , the lollapalooza TCMP demands that you verify e-v-e-r-y. s-i-n-g-l-e line of your return , from your name to your bank account . That requires bales of supporting documents . <p> The IRS uses its findings from the TCMP to determine its top-secret DIF formula -- the Discriminant Function scoring system that is used @ @ @ @ @ @ @ @ @ @ By the way , you are probably off the hook -- at least for now . Your chances of being tapped for the TCMP this year have dwindled considerably , because all but roughly 10% of the notices were sent out between October and May . ) <p> My TCMP purgatory began last January outside my Deerfield Beach , Fla. condominium just north of Fort Lauderdale when my mailman handed me a letter with the all-too-familiar IRS envelope . My stomach knotted as I ripped it open . I knew I was a likely target for a regular audit , since I 'm a single , self-employed journalist who in 1988 deducted the cost of my home office , the business use of my car and high medical bills . But I felt physically ill when I began reading the computer-generated letter and realized I was headed for the notorious TCMP . Why had I been so dumb as to have written off that black velvet strapless dress as a business expense ? Would they also challenge my home office ? My donations to the Salvation Army ? Having paid $197 @ @ @ @ @ @ @ @ @ @ my panic . <p> The letter directed me to bring " everything you need to support your 1988 tax return to IRS office at 300 Lock Road at 8 a.m . Feb. 16 . " I had about four weeks to comb through and decipher my 10 pounds of receipts , canceled checks , credit-card slips and other tax records . During that time , my friends told me horror stories they had heard about the dreaded TCMP . One said I 'd have to verify my Social Security number by producing the card -- which , as my luck would have it , was locked up for the season at my mom 's summer house some 1,700 miles away in Maine . Another insisted that the audit would take several days , maybe even weeks , and that I would have to return to the IRS office again and again . I tried to stay calm , but each time the subject arose I broke into a cold sweat . <p> My C.P.A. , Ned Fagg of the national accounting firm McGladrey &; Pullen , did his best to calm @ @ @ @ @ @ @ @ @ @ he and I sorted through my tax paraphernalia , he assured me that I was as prepared as I could be . <p> When we arrived at 300 Lock Road in Deerfield Beach , about five minutes from my home , I found the IRS office disarmingly elegant : polished marble floors in the lobby and maroon carpeting in the large second-floor examining room , which was divided into intimate pods by gray tweed partitions . Examiner Valerie Allen , pretty , soft-spoken and uncommonly courteous , seemed about my age ( 32 ) and therefore a lot less threatening than I expected . I was imagining I 'd face a crotchety old geezer with nicotine-stained fingers and a beer belly . After Allen ushered us into her cubicle , Ned and I pulled our ammunition out of my cardboard file box and the examination began . <p> At first Allen 's questions were innocent enough . Reading from a checklist , she asked : Have you been audited before ? Do you have a copy of your 1988 return ? Did you amend your return ? Do you have a @ @ @ @ @ @ @ @ @ @ No . Yes . <p> " Now I 'm going to ask you some questions about income items , some of them taxable , some of them not , " she said . " Did you sell anything ? Have other jobs ? Do you have a hobby that you sold anything from ? Do you have any rental income ? Any alimony ? Did you win any prizes like the lottery ? Any proceeds from gambling ? Any gifts ? Any grants ? Any cash loans ? " <p> So far , so good . Nothing hard here . <p> Then , just as I was about to relax , she downshifted into a dagger-sharp , line-by-line grilling . <p> " Let 's start with interest income , " she said pointedly . <p> Ned pulled out the 1099 forms that my bank and stockbroker had sent me . <p> " Now medical . Do you want to show me your receipts ? " <p> This was a biggie . A health problem had put me in the hospital twice in 1988 , once in Boston , and had entailed @ @ @ @ @ @ @ @ @ @ her the ledger I kept , Allen asked to see the canceled checks for my health insurance premiums . I pulled out five checks totaling $8,146.12 . <p> Then she asked , did n't my insurance company reimburse me for doctor bills ? I explained that I had assigned benefits to the doctors . The checks I wrote were either part of my deductible or were for expenses not covered by insurance . About the pharmacies I had paid by check , she said : name one . I named two , but when I volunteered to fish out the receipts , Ned nudged me under the table . I got the message and shut up . He told me later that volunteering information -- any information -- is just an invitation to trouble . <p> The next question came out of the blue . " Why do you go to Massachusetts ? " she asked , looking me square in the eye . I explained that my doctors were highly regarded specialists at Massachusetts General Hospital . " What are their names ? " Someone trying to pass off summer @ @ @ @ @ @ @ @ @ @ have had a problem . I did n't blink . " Dr. Charles Poletti and Dr. Lawrence Borges . " She relaxed . Ned relaxed . I relaxed , knowing that she believed me . <p> Charitable contributions ? Allen looked at my receipts from the Salvation Army for seven boxes of clothes , an antique chair , assorted household items and a bike , all worth about $495 . Nothing unusual . <p> On to Schedule C and my freelance-writing income . " Give me a brief description of your day-to-day operation , " she said . I explained that most of my time was spent on assignments from the local newspaper , the Sun-Sentinel , and the rest on work for Money and Newsweek . She began peppering me with questions . Did I employ anyone ? No . How long had I been a writer ? Eleven years . Where was my checking account ? Florida National Bank . And then , unexpectedly , came these : Did I keep cash mostly on hand or in the bank ? In the bank . Did I have a safe-deposit @ @ @ @ @ @ @ @ @ @ Do n't ask me why . Maybe it was the strain . Maybe it was having . my personal affairs subjected to a stranger 's scrutiny . But as I answered her question about my safe-deposit box -- it contains my will , a living will , my condo documents and a personal letter to my loved ones to be read with my will -- something nearly gave way . I did n't break , but Allen was ready . Without looking , she reached for a box of tissues from the counter behind her and pushed it within my reach on the desk . It was nearly empty . <p> Bank statements ? She shuffled through my pile and kept them all to copy later . Another surprise question : Did I have my January 1989 bank statements ? Actually , I did . Allen kept them for copying too . <p> Next came trouble . Most people probably have something on their tax returns they feel a little queasy about . For me , it was my home office , basically a work area along a wall in my @ @ @ @ @ @ @ @ @ @ since 1986 . Now the chickens were coming to the home office to roost . <p> Allen tiptoed into this subject by asking a one-word question . " Insurance ? " Ned knew she was referring to my condo insurance write-off for the office . " She has a total of $195 , and she 's got 13% of it , " said Ned , describing the percentage of the insurance that I deducted because my home office takes up 13% of my apartment 's square footage . <p> I should have seen the next line of questioning coming . But I did n't , and I was broadsided . " How many bedrooms do you have in your apartment ? " <p> " Just one . " <p> " What section of your apartment do you use for your office ? " Fighting panic , I went with the truth . <p> " I have my office along the wall to the living room . " <p> " So your office is in the living room ? " <p> " No , my office is part of the bedroom . @ @ @ @ @ @ @ @ @ @ I have my computer , my computer desk , my printer , my filing cabinet , my books and my monitor , " I said , the weight of my office settling on my heart . <p> " Um-hmmm , " she said . " Mortgage ? " <p> I started to breathe again . " She deducted $225 interest , " Ned answered . <p> " Office expenses ? " <p> Here 's where things got strange . Allen looked down the column in my ledger devoted to home-office expenses and thumbed through the receipts I had stuffed into an envelope . She let pass $21.15 for binoculars I had bought rather than accepting them gratis from a company I was writing about . But she zeroed in on $50 for attending an architecture conference . " The publication I intended to sell the story to required me to attend , " I said , and she accepted that . <p> Allen then asked about two checks to a grocery and liquor store -- expenses for a dinner party I gave for a group of journalists . She noted that @ @ @ @ @ @ @ @ @ @ . I opened my 1988 appointment diary and showed her where I had recorded my plans for the party , with the names of some of the people invited . After pausing for a few seconds , she moved on . The lesson was clear ; from now on , I 'd clearly separate my business and personal expenses in my ledger and note them on my checks . <p> She proceeded to look at my log of miles driven for business and asked Ned why my mileage was n't listed under car and truck expense . He explained that I had included it with my travel expenses . <p> Then Allen spotted another squishy write-off : two checks to ABC Fashion for $90 each . I fessed up . " If there is anything questionable on my return , this is it , " I said . " I did n't have a formal dress , and one of the companies I worked for had a black-tie Christmas party . I had a $180 dress made for the party , and I have not worn it since . " <p> @ @ @ @ @ @ @ @ @ @ for costs associated with people you entertain to get business . If I were being real sticky , I would ask for a guest list of people at the party , then ask you to show me the business that resulted , " she said . But she let the dress pass , and my heart warmed to the woman . <p> After a few more routine questions , she left to copy the bank statements . Upon returning , Allen said : " I 'll go through these bank deposits and give you a call if they reveal any income that I ca n't account for . You 'll get a letter in four to six weeks regarding the outcome . Go home and start on 1989 . " Two hours and 15 minutes after my TCMP audit began , it was over . <p> In the weeks that followed , I tried not to think about the pending letter . But after seven weeks and still no letter , I called Allen . She told me that she had made a few " adjustments " to my return but @ @ @ @ @ @ @ @ @ @ that was n't unusual . In 1987 , half the taxpayers who underwent TCMP audits owed no extra taxes , and of the 43% who did , the amounts were often less than $100 . My TCMP audit is n't truly finished , though . Allen 's findings are subject to review by her district office in Fort Lauderdale , so I probably wo n't know for sure how I came through until July . <p> Yet even if I do n't owe the IRS a nickel , my job as an IRS guinea pig did n't come cheap . For starters , Ned charged $675 . And since freelance writers do n't get paid for the time they do n't work , the seven hours I spent organizing my records , meeting with Ned and in the audit itself are lost forever . I figure I could have earned at least an extra $100 if not for the IRS ' snoopiness . <p> I 'll remember that if I ever wear my black party dress again . <p> by Elizabeth Roberts <p> 
##2018864 <p> Communism 's collapse could make the Old World the site of the most enticing -- and treacherous-stock market plays in the 1990s.Our experts tell you where they 're putting their money now . <p> The Berlin Wall 's fall last November raised more than hopes for finally reconciling Europe 's post-Hitler halves . It upped the ante of perestroika , Mikhail Gorbachev 's bold reforms of the Soviet bloc 's crumbling economies . It also triggered one of the most dramatic diversions of international capital in decades . Consider : <p> In the fourth quarter of 1989 , U.S. investors alone made net purchases of European stocks totaling $2.5 billion , a fourteenfold gain over the same period in 1988 . By far the largest of those net purchases were of German stocks , up nearly fivefold to $585 million . Yet that was a trickle in the global torrent of money inundating West Germany . For the quarter , net foreign funds invested in that country rose to a record $16 billion , three times the figure a year earlier . <p> In the first 10 @ @ @ @ @ @ @ @ @ @ that U.S. stocks advanced 22% , vs. an 8% rise ( in dollar terms ) for European issues . Six months later , share prices were down 2% on Wall Street but up 11% in Europe -- Germany 's 36% gain was tops among major markets -- as the dollar slid 8% on average across the Atlantic . ( A sinking dollar inflates oveseas returns , while a rising dollar deflates them . ) <p> In the six months to May 1 , stock funds focused on European markets led all types of diversified portfolios with an average 14% gain vs. a 3% decline for stock funds overall and a 2% rise for internationals -- the main casualties of the Tokyo exchange 's 28% fall . ( For an analysis of the top Eurofunds , consult Fund Watch in MONEY 'S April 1990 issue . ) <p> Mutual funds are ideal for Americans who lack the expertise or resolve to become fluent in transatlantic stock picking . But the direct route is gaining popularity among seasoned shareholders eager to broaden their U.S. portfolios and profit horizons with European stocks . If @ @ @ @ @ @ @ @ @ @ advice of the veteran Eurostrategists introduced below . They will not beguile you with travelogues of faraway bourses reveling in post-communism 's la dolce vita . To the contrary , they know the investor 's atlas of the Old World is being altered by powerful -- and unpredictable -- tectonic forces . Colliding with each other are movements for democracy in Eastern Europe , unification in Germany , and the integration of the European Community 's 12 western economies by 1992 . The challenge for Americans is to overcome a collective detachment from European markets and discover sensible ways to profit from the changes now transforming them . <p> The most vexing issue is not the trend but the timing . For example , it could take as long as a decade to close the gap between low-wage Eastern Europe 's vast potential and its current economic mess . To attract foreign investment , these countries must make their funny-money currencies convertible in the West via devaluation , which carries twin curses of rampant inflation and shortages of goods . To make products competitive on world markets , the East must @ @ @ @ @ @ @ @ @ @ the consequences of rising unemployment and factory unrest . <p> The hope is that this year 's free national elections in most Eastern Europe nations will create governments with the legitimacy to ask their people to endure more economic pain . The danger is that the new leadership will buckle under the strain . " I do n't want my money in Europe when the Eastern Europeans suddenly realize that democracy does n't quickly lead to prosperity , " says Jim Rogers , a wealthy Wall Street dropout and Columbia University finance professor who anticipated big bull market moves in Austria , Germany and Spain in the mid-1980s . " European markets could be at the mercy of massive uprisings in -- and immigration from -- the East that the Soviets will be powerless to contain , " he adds . <p> Rogers , 47 , is no armchair investor . An avid motorcyclist , he departed from Ireland last March on an ambitious two-wheel , 20,000-mile grand tour of Eurasia that will take him to Japan and back again to Western Europe via Siberia by summer 's end . Says @ @ @ @ @ @ @ @ @ @ expectations of a huge flow of new orders from Eastern Europe , which has no money to buy anything . What 's actually going to happen is a huge flow of funds to Eastern Europe . This will soak up excess capital that previously went into European stock markets , which I submit will be affected in an adverse way . " <p> A much more upbeat , though still realistic , case is made by David Roche , Morgan Stanley 's European strategist in London . Money managers exploring Europe often cite Roche 's farsighted research ( first published in April 1989 ) on the interplay of perestroika and project 1992 's single market , which he sees as the flip sides of a new Greater Europe coin worth owning for long-term gains . " I think most stock markets reflect a peace dividend , " notes Roche , " in that investors know political tension is declining worldwide . Therefore , if Gorbachev is replaced or the cold war returns , then all stock markets would fall . You would not be protected in the U.S. any more than @ @ @ @ @ @ @ @ @ @ , gold and defense stocks would rise . If perestroika goes ahead , however , the market will clearly trend upward because what 's not reflected in stock prices is the East 's developing market of 428 million people -- and its positive effect on the growth and cyclicality of Europe 's economies . " <p> Roche says investors should be vigilant for economic setbacks in the East -- and the ensuing buying opportunities . " There will be horror stories that make markets go bump in the night , " he predicts . " But then , either you believe Communism is dead and wo n't be restored or you do n't . My advice : keep the faith . " YOUR STAKE IN PERESTROIKA <p> To that end , Roche recently singled out the top perestroika plays in his European model portfolio of 89 stocks . Thus the seven he recommends ( in three industry sectors in boldface type below ) are viewed as chief beneficiaries of the I marches toward capitalism in the East and a single market in the West . With the exception of Danieli , @ @ @ @ @ @ @ @ @ @ local currencies ) in the Wall Street Journal 's overseas markets listings . As indicated below , four conveniently trade as American Depositary Receipts ( ADRs ) on U.S. exchanges or over the counter . Price quotes and direct purchases of stocks sold only on European exchanges can be handled by major full-service brokerages in the U.S. and discounter Fidelity Brokerage Services . Commissions are comparable to those on U.S. stocks . <p> Information technology . Leaders in telecommunications , office equipment and electrical engineering should see fatter order books and profits as the East 's vacuum-tube economies enter the electronic age . Roche recalls visiting a government ministry in Eastern Europe that had 3,500 employees but only one photocopier and no fax machine . " These economies are dominated by industrial output of things people do n't want to own themselves , " he explains . , But people want services , which run on technology and knowledge . " He recommends two pioneers of East-West trade . France 's CGE Group ( lately 609 francs , or $108 , on the Paris exchange ) is Europe 's titan of @ @ @ @ @ @ @ @ @ @ 's $36 billion Siemens ( its ADR recently traded over the counter at $87 ) excels in office equipment , factory automation and medical technology . " Over a third of Soviet hospitals do n't even have running water , " notes Roche . <p> Capital equipment and transportation . The mid-century state of communist industry was neatly captured by last fall 's TV images of East Berliners puttering across the border in their clunky , smoke-belching Trabants . Factories hatching such ugly ducklings are just as outdated . Roche figures it takes twice as much steel to produce a car in the East as it does in Western plants with efficient casting equipment . His favorite supplier of such machinery , with 30% of its orders from Russia , is Italy 's $500 million Danieli . Buy its nonvoting savings shares ( 7,700lire , $6.25 ) , which sell at a 35% discount to the common and yield 3.1% . Also look for the auto , truck and rail divisions of Italy 's Fiat to build on the $411 billion holding company 's existing joint ventures in the East . @ @ @ @ @ @ @ @ @ @ ) yielding 2.8% . <p> Banking and insurance . Roche says large German institutions stand to profit most from the East 's acute need for financial services , in part because of their dual roles as lenders to -- and major shareholders in -- local companies expanding in post-communist Europe . Such alliances provide big head starts for Deutsche Bank ( ADR OTC , $443 ) , the country 's richest in assets , and the third-ranked Commerzbank ( ADR OTC , $32 ) . Similarly , he 's keen on German insurers because perestroika should lead to greater privatization of property . " If individuals own their homes , shops or factories , " he reasons , " the first thing they do is to insure them . " Small investors , however , may be put off by the formidable share price of his Frankfurt-listed pick , Munich Reinsurance ( 2,125marks , $1,266 ) . <p> Not to worry , says Marc Alexandre , head of Paris ' Atlantic Finance , one of Europe 's top independent research firms . He thinks Italy 's biggest insurer , Generali ( @ @ @ @ @ @ @ @ @ @ expand in the East . " Until World War II , Generali was Central Europe 's main insurer and still has strong name recognition there , " he explains . " Yet none of this potential is reflected in the stock price , as is the case with its competitors in Germany . " <p> Alexandre says other perestroika sleepers abound on the lethargic Milan exchange . The average stock sells at 3.4 times this year , s cash flow vs. 6.3 for European and 7.6 for U.S. issues . One reason is that Italian savers are hooked on tax-exempt government bonds yielding 11.5% . Notes he : " The Milan-listed capital-goods firms we follow are already doing more business in the East . " He recommends $600 million Comau ( 4,800lire , $3.90 ) , a world leader in industrial robotics ; and $400 million Sasib 's savings shares ( 5,430lire , $4.40 ) , selling at a 27% discount to the common of this specialist in food-packaging equipment . THE URGE TO SPLURGE <p> Nigel Ledeboer , chief portfolio manager at G.T. Management in London , has been deluged @ @ @ @ @ @ @ @ @ @ 's 10 open-end Eurofunds have surged threefold to $2 billion . ( G.T. Europe Growth , the only one sold in the U.S. , gained 24% in the 12 months to May 1 . ) Last March another $240 million was raised for G.T. Greater Europe , a closed-end stock fund recently traded on the NYSE at $15 , a 6.5% premium to the per-share net asset value of the fund 's holdings . <p> Ledeboer 's new closed-end fund can and will invest aggressively in small , unseasoned , privately held companies-even Eastern European ( when that 's possible , he adds ) . Initially , however , he 's placing some long-term bets on anticipated stronger consumer spending on the Continent spurred by German unification and hordes of tourists en route to or from the East . <p> " French firms selling high-margin luxury goods will be among the biggest winners , " says Ledeboer . He likes three brand names on the Paris exchange : Clarins ( 3,810francs , $673 ) , a $173 million maker of skin-care products ; Remy Martin ( 379 francs , $67 ) @ @ @ @ @ @ @ @ @ @ Laurent ( 1,155francs , $208 ) , the designer 's $529 million fashion and perfume company . He 's also impressed with the growth of Accor ( 935 francs , $166 ) , a $2.6 billion hotel chain , and Canal + ( ADR OTC , $31 ) , a $934 million French pay-TV service expanding in West Germany , Belgium and Spain . " Competition is finally coming to Spanish TV , " says Ledeboer . Accordingly , he recommends a newly licensed TV broadcaster listed in Madrid : Antena 3 ( 2,100pesetas , $20 ) . HIDDEN VALUES <p> From Alliance Capital 's London office , Glenn Wellman oversees a stable of four stock funds enlarged by March 's $252 million offering of Alliance New Europe . The closed-end portfolio , a direct competitor of G.T. Greater Europe , recently traded on the NYSE at $10.50 , a 5% discount to net asset value . " Europe will be this decade 's great long-term-growth story , " predicts Wellman , who sees economic gains ( after adjusting for inflation ) of 4% to 5% a year in the 1990s @ @ @ @ @ @ @ @ @ @ 80s . <p> He believes that unrecognized bargains currently abound in Europe 's fragmented auto components sector . Reason : most investors mistakenly view the group as unglamorous captive suppliers to their national auto industries . " The stocks are already cheap relative to their steady earnings gains of 10% to 15% a year , " he explains . Yet growth should accelerate as more Western and Japanese car companies rush to open plants and dealerships in Eastern Europe . <p> Consider Volkswagen ( ADR OTC , $66 ) , Europe 's No. 1 automaker and Wellman 's hands-down favorite to grab the pole position in post-communist markets . In March the company agreed to invest $2.9 billion in a joint venture to assemble subcompact VW Polos in East Germany . " While Volkswagen made headlines , " he says , " dozens of its suppliers quietly cut their own production deals in East Germany . Others are coming East on the coattails of Volkswagen 's competitors . " Standouts in Wellman 's view are Germany 's $4.7 billion Continental ( ADR OTC , $17.50 ) and $2 billion FAG Kugelfischer @ @ @ @ @ @ @ @ @ @ billion Yaleo ( 670 francs , $119 ) ; and Italy 's $3 billion Magneti Marelli ( 1,950lire , $1.60 ) . HIGH ON HYDRO <p> Many analysts worry that the Revolution of 1989 will hopelessly delay the economic consolidation of Western Europe . Not Guy Rigden , Eurostrategist at UBS Phillips &; Drew , the Union Bank of Switzerland 's London-based investment bank . Trade barriers will continue to fall , he says , as more Europeans recognize how deregulation 's bitter pill is stimulating the region 's sweet gains in investment , employment and consumer spending . " One of the surest ways to play this boom is via utilities , " says Rigden . " New demand and regulatory reforms should greatly reward the most efficient producers . " High on his buy list are three electric companies whose capacity is concentrated in low-cost hydropower : Spain 's Iberduero ( 618 pesetas , $5.83 ) , yielding 7.4% ; Germany 's Viag ( 405 marks , $241 ) , yielding 3.1% ; and Austria 's Verbund ( 615 schillings , $52 ) , yielding 2.4% . <p> PHOTO @ @ @ @ @ @ @ @ @ @ two-wheel tour of Eurasian economies from Ireland 's Dromoland Castle near Shannon . <p> PHOTO ( COLOR ) : British money manager Nigel Ledeboer stops off in Frankfurt to look for bargains among Germany 's towering stock prices . <p> PHOTO ( COLOR ) : French analyst Marc Alexandre is high on low-profile Italian stocks he follows from his office near Paris ' Bois de Boulogne . <p> ILLUSTRATIONS <p> BY JUNIUS ELLIS <p> 