Tax Answers

April 06, 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: If a seller holds the entire first mortgage on a property, can the capital gains tax be spread over the life of the mortgage or does he have to declare all of the capital gains the year of the sale?

A: Unless the seller is considered a "dealer" in real property, he can spread the gain on the sale over the life of the mortgage based on the gross profit ratio and the amount of principal collected in a given year. This type of sale is termed an "installment sale" and the gain is reported annually on Internal Revenue Service Form 6252.

Q: When a retired individual is receiving a pension and he and his wife both are getting Social Security, if you want to have the one receiving the pension qualify for the pension exclusion section of their Maryland state tax return, do you list only him, the individual who's receiving the Social Security, or do you have to include the spouse's Social Security also?

A: The Pension Exclusion Computation, at the bottom of Page 2 of Maryland Form 502, is calculated separately for each spouse on a joint return. The portion of the taxable pension income and zTC the Social Security benefits you and your spouse received are entered on the work sheet separately for Taxpayer A and Taxpayer B. The total of the two taxpayers' amounts should agree with the numbers shown above on Page 2 of Form 502.

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.

Fax questions to the Business News Department at (410) 783-2517.

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