Members of the Maryland Association of Certified Public...

Tax answers

February 15, 1996

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q: Is ground rent tax deductible on my Maryland and federal returns? If so, as interest or otherwise?

A: Ground rent is not a tax. Payment of "redeemable" ground rents are deductible as mortgage interest if made at least annually. Payment of "non-redeemable" ground rents are not interest, but may be deductible as rent if incurred as a business expense or are for rental property held to produce income. Generally, Maryland ground rents incurred for personal residential purposes are redeemable (i.e., they can be purchased to extinguish them). If you are a commercial taxpayer, please consult further with a tax adviser who specializes in real estate matters or with a real estate attorney.

Q: How are gifts to children reported?

A: Gifts are not required to be reported to the IRS unless they are greater than $10,000 ($20,000 with the consent of the spouse). Gifts that are required to be reported should be reported by the donor, not the recipient, on Form 709 (United States Gift Tax Return). A property gift should be valued at the fair market value at the date of the gift.

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

A joint service from The Sun and the Maryland Association of Certified Public Accountants can help you with your tax queries. BTC Association members, all CPAs, will answer questions from readers until April 15. To ask a tax question, call Sundial, The Sun's telephone information service, at (410) 783-1800. Using a touch-tone phone, enter 6225 after you hear the greeting.

Callers are asked to leave their names and phone numbers should questions need to be clarified. Selected questions will be answered in the Business section. No questions will be answered by phone. Names and numbers will not be published.

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