Question: I own shares of common stock in a Canadian corporation; they withhold from my dividend checks a tax applicable to non-residents. Is this tax deductible on my federal income tax return?

Answer: Yes--and you have a choice of two ways to claim it. The simplest way is to list "foreign tax paid" as a miscellaneous deduction on Schedule A.

If you don't itemize deductions, you must complete Form 1116, "Computation of Foreign Tax Credit," and attach it to your 1040.

Unfortunately, this is a pretty complicated form; and if you have income from and paid taxes to more than one country, then Schedule A (Form 1116) is required, showing the separate calculations for each country.

To be honest, if the amount involved is only a few dollars and I didn't itemize deductions, I would forget the tax rather than fool with Form 1116 (even though this is contrary to my policy of total and complete accuracy).

If you use Form 1116, the foreign tax credit is taken as a direct deduction from total tax liability, rather than as a reduction of taxable income. On 1981 returns it showed up on line 42 on page 2 of Form 1040.

Q: My wife and I plan to start accounts or trusts (through a bank or broker) for our two preschool grandchildren, to mature about the time they should be ready for college. We would start with a few thousand dollars for each child, perhaps adding irregularly in future years. Are there minimum amounts required to open such accounts? Is it necessary to obtain Social Security numbers for such young children if my wife or I serve as administrators or trustees?

A: Last question first: Yes, you will have to have Social Security numbers for the children. Wherever you open the account, a number will be required and you don't want to use yours or your wife's, or the earnings will show up charged to you on an IRS computer match.

Most savings institutions have only nominal minimums (or none at all) for regular accounts, but interest rates are relatively low. If you go the bank route, you should get CDs for the higher yields, and these are subject to various minimums depending on the term selected.

I'm not sure what you mean by an account with a broker. Most brokers will accommodate the purchase of some shares of stock, but may have substantial minimums for a continuing account.

But if you want to pick up shares of several corporations for the grandchildren, the larger full-service brokers have "accumulation" accounts geared for the small investor. (Merrill Lynch's is called the "Sharebuilder.")

With such an account you can buy a small number of shares at relatively low brokerage cost. Quarterly dividends are automatically invested in additional fractional shares of the same stock--a good way to go for this kind of account.

Another alternative--one I happen to prefer--is to use mutual funds. With at least 12 years for it to grow, I would select a good fund family, with the initial deposit split between a money market fund and a somewhat speculative growth stock fund.

Q: Several years ago I was employed and set up an IRA. Now I am a homemaker and qualify for a spousal IRA based on my husband's earnings. Can I put the new money into the old account (from when I was employed) or must I set up a new "spousal" account? What happens if I return to work again when my children are older?

A: You may continue to use the original account for annual IRA deposits regardless of whether they are based on your own earnings or derived as spousal payments from your husband's earnings.

Only lump-sum distributions rolled over into an IRA need to be kept separate from other IRA funds.