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: Where do I deduct the foreign tax paid on dividends of a foreign stock held as an American Depositary Receipt?
A: An individual taxpayer can deduct only foreign taxes paid on dividends on a foreign stock on line 7 (other taxes) of Schedule A, Itemized Deductions. However, not every taxpayer will have enough total deductions to receive a benefit from itemizing and will have to just take the standard deduction. An alternative that usually results in a greater tax savings is to claim the foreign taxes paid as a credit against the total tax liability by completing Form 1116, Foreign Tax Credit.
Q: My question is relative to cashing Series E savings bonds, some of which have been issued as far back as 1973. If the original owner is deceased and has named a beneficiary, does the beneficiary report his or her cost as the value at the time of the death of the owner or does he have to report the cost as of the issuance of the bond to the original buyer?
A: Upon the death of the holder of a savings bond, any interest gained on the bond is reported as income to the estate. The value of the bond, including interest, at the date of death becomes the tax basis (cost) of the bond to the beneficiary.
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 Sun's Business News Department at (410) 783-2517. Questions will not be answered by phone.