Members of the Maryland Association of Certified Public...

Tax answers &&TC

March 26, 1996

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

Q: My daughter will be graduating in May and we wondered if we would be able to claim her on our 1996 income tax, or should we be planning ahead?

A: You will be able to claim her as long as each of the following five conditions are met: 1) she is legally your daughter or a member of your household; 2) she is a U.S. citizen or resident (or resident of Mexico or Canada) for some part of 1996; 3) if she is married during 1996, she does not file a joint return with her spouse (one exception to this condition) for 1996; 4) she is a full-time student for at least five months in 1996; and 5) you provide more than half of her support during the year 1996.

Q: Fifteen years ago I acquired a rental property. It is now fully depreciated and I wish to sell. Can the one-time $125,000 capital gain exclusion on real estate be used to offset my gain on the sale of my property? If the answer is no, because the property is not my principal residence, how long would I have to live in the property to claim the $125,000 exclusion?

A: To claim the exclusion, the property must be used as your main home for at least three years out of the five-year period ending on the date of the sale. Further requirements are: you must be age 55 or older on the date of the sale; you must have owned your home for at least three years during the five-year period ending on the date of sale; and your or your spouse have never excluded gain previously on the sale of a home after July 26, 1978. Refer to Internal Revenue Service Publication #523 for more details and certain exceptions to these requirements.

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: 3/26/96

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