Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.
Oops. Yesterday an answer contained some incorrect information, so we are reprinting the question with the correct reply:
Q: I have an IRA mutual fund, and over the years dividends and capital gains have been reinvested. Now I am in my 60s and want to begin withdrawing. Is the full amount taxable at the regular rate or are the capital gains taxed at a different rate?
A: Any taxable distribution received from an IRA account is treated as ordinary income. No portion of the taxable distribution is treated as a capital gain.
Q: I retired in the middle of 1994 and started paying estimated taxes. My final 1994 payment was Jan. 15. Do I include that as part of my state tax deductions for 1994 even though I paid it in 1995?
A: Your final 1994 payment that you made in January 1995 will count toward your 1994 state estimated tax payments and will be reported on your 1994 state return. However, your January 1995 payment is not deductible as an itemized deduction on your 1994 federal tax return because it was not made in 1994.
Q: Are expenses for attorneys' fees deductible when you've contested a will and received a cash settlement?
A: If the cash settlement produced taxable income, the attorney's fees may be deductible. However, personal legal expenses generally are not deductible.
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 Baltimore 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 and also offer a Tax Tip of the Week.