Members of the Maryland Association of Certified Public...

Tax questions

April 03, 1997

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

Q: I bought a boat in February 1996 that under IRS rules meets the requirements for a dwelling. Can the interest on the loan be written off? How about the sales tax on the purchase of the boat? Storage fees, since I keep it at a marina? What forms would I use to write off anything pertaining to my boat? Can any other items be written off that I have not mentioned?

A: The interest that is paid from the boat mortgage can be deducted on Schedule A, Itemized Deductions, as an interest deduction on a home. Also on Schedule A, the personal property tax and real estate tax, if any, can be deducted as an itemized deduction. The sales tax paid on the boat can be counted as part of the basis of the boat. The increased basis could potentially lessen a gain in the future, should the boat be sold. The storage of the boat at the marina is not deductible for a personal dwelling unit. This cost can be compared to an association fee, such as may be paid in a condominium complex.

Q: I own shares of AT&T stock and last year received shares in the spinoff of Lucent Technologies as well as a check for the sale of a fractional shares. Is the check that I received placed under the dividends on Schedule B? Do I need to fill in anything for capital gain distribution, line 7, or nontaxable distributions, line 8? How do I figure the basis? Evidently, AT&T was told that the spinoff would be nontaxable.

A: Proceeds from cash received from the sale of fractional shares of Lucent Technologies acquired through the spinoff from AT&T are reported as sale of securities on Schedule D. The holding period is based on your holding period for the AT&T stock. The basis of your Lucent share is calculated based on a percentage of your original AT&T basis. This information is provided on a worksheet provided by AT&T (generally it will be 27.99%). You can calculate your basis in the fractional share sold by determining your per-share basis in Lucent and multiplying it times the fractional shares sold (which will be less than 1.00). The receipt of whole Lucent shares is nontaxable; only cash proceeds from fractional shares are taxed. Note also that a disclosure relating to the spinoff (provided by AT&T with the basis information) should be completed, signed and attached to your return.

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

Readers can find an archive of tax questions answered thus far plus links to other tax information on The Sun's Web site -- www.sunspot.net.

Pub Date: 4/03/97

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