Members of the Maryland Association of Certified Public...

Tax answers

March 21, 1996

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

Q: My former residence was rented in the beginning of 1995. Am I required to take the depreciation on the property? If I choose not to depreciate it, will the IRS penalize me for the depreciation that I could have taken but didn't take when I sell the property in the near future? I understand only the house and not the land is depreciable.

A: If the property is used to produce income, such as rental income, the property becomes eligible for depreciation and it should be claimed. The law generally provides that a cost basis of a property be reduced for depreciation if it was allowable, even if it was not claimed. If this was a temporary rental situation of a personal residence prior to sale, then you may be able to limit your depreciation deduction.

Q: I have an extra $10,000 that I would like to contribute to my IRA. Can I do that? Are there any penalties?

A: No. The maximum amount you as an individual can contribute to your IRA for a taxable year is $2,000. This assumes you have compensation of at least $2,000 and are younger than 70 1/2 in the year for which the contribution is made. The only exceptions to this $2,000 limitation are for rollover contributions and for employer contributions to simplified employee pensions (SEP-IRAs). Excess contributions to an IRA are subject to an excise tax of 6 percent of the amount of the excess. The 6 percent excise tax is levied each year until there are no remaining excess contributions in the IRA.

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.

Pub Date: 3/21/96

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