Tax Answers

March 09, 1994

Here is an answer from members of the Maryland Association of Certified Public Accountants to a reader's tax question. The Sun will publish answers through April 15.

Q: My daughter, age 4, had capital gains from the sale of stock and dividends from mutual funds. Do I need to file a separate tax return for her or can I report the capital gains on my return?

A: Because your daughter had a capital gain, you must file a separate return for her. Here are the conditions that would have to be met for your daughter's income to be included on your 1993 return:

* The child was under age 14 on Jan. 1, 1994.

* The child was otherwise required to file a return for 1993.

* The child's income was only from interest and/or dividends, and was more than $500 but less than $5,000.

* No estimated taxes were paid or applied for 1993 under the child's name and Social Security number.

* There was no "backup" withholding of federal income tax from the child's income.

Be aware that the "parent" taxpayer's return must be used when applying these special tax rules for children under 14. IRS Publication 17 clarifies "parent" in cases of divorce or common law parents.

CORRECTION: A Tax Answer last Thursday gave the wrong amount for the exemption retirees who are 65 or older or disabled can claim for pension benefits on their Maryland return. The correct figure for 1993 is $13,100.

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. Callers are encouraged to leave their names and phone numbers. Names will not be published. Questions will not be answered by phone.

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