Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.
Q: I am 70 years old and have to start withdrawing money from some of my IRAs. If I redeem one and give the money to a grandson for education, or if I give him the IRA money and he redeems it and puts it in an account for education, is it taxed at his rate, which of course would be much lower?
A: If you receive a distribution from an IRA and give the money to your grandson, you will pay the income tax on it -- and at your rate. In addition, the money will be considered a gift, and you may have to pay a gift tax on it. You also are not allowed to transfer the IRA account to your grandson, but you may designate him as beneficiary, and upon your death, he would receive those funds after they have been included in your estate. Remember, distribution must begin not later than April 1 of the calendar year following your reaching age 70 1/2 , and the distributions are taxable in the year in which they are received.
Q: I am a tenant-in-common with my surviving, retired parent although I live in an apartment. Can I still claim interest and real estate taxes on that residence on my return since I am responsible for it even though I don't live at that particular address?
A: Yes. The IRS will consider this your second residence if you do not rent the dwelling unit to others at any time during the year.
The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.
Members of the Maryland Association of Certified Public Accountants will answer tax questions from readers until April 15 and also offer a Tax Tip of the Week.
To submit a question, call Sundial, The Sun's telephone information service, at (410) 783-1800. In Anne Arundel County call 268-7736, in Harford County 836-5028, and in Carroll 848-0338. Using a touch-tone phone, enter 6225 after the greeting. Push 1 to submit a tax question; state the question in full. Push 2 to hear the tax tip. Selected questions will be answered in the Business section. No questions will be answered by phone.