Tax Answers

February 12, 1994

Here are answers from members of the Maryland Association of Certified Public Accountants to readers' tax questions. The Baltimore Sun will publish answers through April 15.

Q: I need to know how to find the basis for a rental property to report on Form 4797, Sales of Business Property, for a house that has been foreclosed. What do you use as the selling price?

A: The basis of property you buy is usually its cost plus improvements you have made less depreciation or casualty losses. Other factors, such as how you used the property (e.g., business or personal), and how you obtained the property (e.g., inheritance or as a gift) will affect the basis. The selling price to report in Form 4797 is the amount you realized from the foreclosed property. If you were personally liable for repaying the debt, the amount realized is the amount of the canceled debt, up to the fair market value of the property. This is known as recourse debt. If you were not personally liable (nonrecourse debt), the amount realized is the full amount of the canceled debt.

Q: How much money do you have to make before being required to submit a tax return? Both of us are over 65.

A: For 1993, a married couple filing a joint return with both spouses 65 years or older would have to gross $12,300 before being required to submit a tax return.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary. Consult with a tax adviser for specific advice.

Readers may submit questions by phone, mail or fax. Selecte questions will be answered in The Sun and The Evening Sun.

To ask a tax question by phone, call Sundial, The Sun's telephone information service, at (410) 783-1800. In Anne Arundel County call 268-7736, in Harford County 836-5028, and in Carroll County 848-0338. Enter 6120 after you hear the greeting.

Written queries may be sent to TAX QUESTIONS, The Baltimore Sun, Business News Department, 501 N. Calvert St., Baltimore, Md. 21278. Fax questions to The Sun's Business News Department at (410) 783-2517. Callers are encouraged to leave their names and phone numbers should questions need to be clarified. Questions will not be answered by phone. Names and numbers will not be published.

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