Question: We have received a certificate for additional shares of IBM stock as a result of a recent stock split. How do I show this on our 1979 income tax return?

Answer: You don't. Generally a stock split or stock dividend is not taxable income and should not be reported on your return.

However, the split must be accounted for; it will affect your calculations when you sell the shares. You must spread the cost basis of your original shares over the total num ber of shares owned after the split.

For example, let's assume you had 100 shares of IBM that you had bought originally for $280 a share (including brokerage fees) -- a total cost of $28,000.

Now (after the split) you own 400 shares. If you divide the original cost -- $28,000 -- by the new number of shares -- 400 -- you get a pershare figure of $70. That is now your cost basis for figuring capital gain or loss on a future scale.

Q: Mu husband and I are elderly persons with no children. We each have separate estates. I want to designate where my estate should go if I should die first -- but I would also like my husband to have the income as long as he lives. Is there a way of doing this?

A: You have described a set of circumstances that are tailor-made for a testamentary trust. This is a technique for permitting the income from an estate to go to a specified individual survivor for life while conserving the principle of the estate for ultimate passage to another beneficiary.

There are many variations possible. The provisions of the trust and the wording of the will which establishes the trust must be quite precise and must conform to established legal requirements in your state.

This is not a do-it-yourself project. You should see an attorney who specializes in wills and estate planning.

Q: A mutual fund salesman mentioned something called "dollar cost averaging" which he said would save me money. I didn't understand it; can you explain?

A: Dollar averaging won't save you any money; but it is an investment technique that may reduce the average cost of shares of stock or -- in this case -- mutual fund shares.

The theory goes like this: If you invest a fixed number of dollars on a regular periodic basis -- like monthly or quarterly -- then the average cost to you will be less than the average price of the shares on the purchase dates.

The reason behind this apparent paradox is that by investing the same amount each time, your money buys more shares when the price is low and less when the price is higher. Irrefutable fact: If you compute the average price per share for the purchase dates, it will be higher than your average cost of each share.

But this technique is intended only for the small and unsophisticated investor. For instance, it is quite possible, even likely, that the recurring date selected for the periodic investment will not be the date with the lowest price for the period.

Quite obviously, if you're market-wise you would be better off investing a larger amount when the price of the stock is low, and skipping entirely those times when the price is too high.

But picking market lows and highs is time-consuming and doesn't always work even for the most sophisticated investor. If you're investing a small amount -- perhaps $50 or $100 a month -- and don't follow the market, then a recurring periodic payment is a good way to go for several reasons. Dollar averaging is one of the valid benefits of such a regular program.

Q: I recently paid a considerable sum for termite-proofing my house plus annual inspections. Can the cost be applied to my house as a capital improvement, since I would have to furnish a termite inspection certificate if I sold the house?

A: Sorry -- termite treatment is in the same category as painting or replacing a bad wall switch.

As a general rule, anything that keeps the house in normal "operating" condition or simply prevents deterioration is considered repair and maintenance rather than a capital improvement.

On the other hand, the cost of a termite inspection and certificate (usually required) when you sell the house is an expense of sale, and may be added to the cost base when calculating gain or loss.