Tax Answers

February 16, 1994

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

Q: May I offset the gains in a small business, land development, with the losses incurred in personal investment? Example: I expect to have about a $200,000 gain in land development and I have incurred about $150,000 loss in the market. May they be offset?

A: It depends. If you owned and developed the land as an investment activity and not as a dealer or trader of land, then the gain will be considered a capital gain. When trading as an investor (not a dealer) in the stock market and incurring a loss, this loss is usually considered a capital loss when realized and can be offset against the capital gain. If you don't have a capital gain to offset the capital loss, you could generally only deduct up to $3,000 a year for each subsequent year.

We have winnings of $5,000 on the Maryland lotto and losing ticket stubs of $3,228. Can we claim the losing stubs as a loss? Does it offset the winnings? What form do we use?

A: You are not allowed to offset gambling losses against winnings. Report your $5,000 total gambling winnings as miscellaneous income on line 22 of Form 1040. Your losses of $3,220 can be deducted as a miscellaneous deduction on line 25 of Schedule A. It's a wise idea to hold on to your receipts or ticket stubs.

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. Selected 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. Using a touch-tone phone, enter 6120 after the greeting.

Written queries may be sent to TAX QUESTIONS, The Baltimore Sun, Business News Department, 501 N. Calvert St., Baltimore 21278. Fax questions to the Business News Department at (410) 783-2517. Questions will not be answered by phone.

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