Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.
Q: I own some commercial property. The county offered $5,200 for a deed of easement to put sewage pipes in, not for sale of any of the property. How do I show this income on the tax form?
A: The payment from the county reduces your basis in the portion of the land affected by the easement (as distinguished from any buildings or improvements on the property). Report the sales proceeds on Form 4797. Assuming that your basis in that portion of the property is at least $5,200, report the basis of the property sold as $5,200, so as to have no loss or gain. If your basis is less that $5,200, you will have to recognize the gain measured by the difference between the $5,200 and your basis. If you held the land for longer than one year, any gain is treated as a long-term capital gain.
Q: A Maryland General Obligation Bond was purchased at a premium and called at par. Is the difference between purchase cost and redemption at par eligible as a capital loss?
A: No. If purchased at original issue, the premium is amortized over the life of the bond, and reduces the tax basis of the bond to zero at the time it is redeemed. It does not create a capital loss. However, if purchased subsequent to the original issue date, you must determine how much of the original issue premium remains unamortized at the date of purchase and compare that to the amount you paid. If you paid more than the face value plus the unamortized premium, then the excess is "market premium" and will not be amortized and can remain as part of your tax basis at the time of redemption.
The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.
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 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 a tax tip. Selected questions will be answered in the Business section. No questions will be answered by phone. Please leave your name and phone number.