Members of the Maryland Association of Certified Public...

Tax answers

March 05, 1996

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

Q: I am developing an education fund for my 15-year-old grandson. This year he received interest of approximately $800. Looking at the tax form, it appears he owes over $100 on this. Is he entitled to an exemption on his form since he is also being claimed on his mother's form as a dependent? If he has to fill out a tax form for himself, can he take any deductions? Does he have to file a state return?

A: Dependent children whose unearned income is at least $1 and whose gross total income is at least $650 must file a tax return for 1995. Such children are entitled to a $650 standard deduction, but they are not eligible for a personal exemption when they can be claimed as a dependent by another taxpayer. The standard deduction can be increased to the extent of the child's earned income, up to $3,900, the regular standard deduction amount. At the $800 income level, your grandson is not required for file a Maryland state return. He could file a request for a refund of any taxes he might have paid to the state. BTC By the way, he should only have to pay $24 in federal tax on the $800.

Q: Do I have to pay income tax on an inheritance?

A: Generally, income obtained via inheritance is not included in gross income; therefore, it is not taxable. There is an exception to the rule which relates to the inheritance of IRAs and other retirement arrangements. If you inherit such an instrument, see your tax adviser for further information.

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. 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 Names and numbers will not be published.

Pub Date: 3/05/96

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