Question: I am 55 years old, my wife 52. In the past we have sold jointly-owned homes and deferred the tax on gains by purchasing replacement residences. We have owned and lived in our present residence for about eight months now. To take advantage of the $125,000 exclusion of gain: (1) How long must we own the residence? (2) How long must we live in it? (3) Must we both be 55 years of age?

Answer: You must own and live in the residence for at least three of the five years prior to the sale. The three years do not have to be continuous, as long as you owned and lived in the home for a total of 36 full months or 1,095 days (365 times 3) during the five-year period.

Further, the three-year period of ownership does not have to be the same three years as the period of occupancy. But each test -- ownership and use as your principal residence -- must equal three years of the five years before the sale.

There is one exception. If you bought your present home after July 26, 1978 (as you did) and you moved from your previous home because it was either condemned or destroyed by fire, you may count the time you lived in that home also.

To answer your last question: No, it isn't necessary for both husband and wife to have reached age 55. You qualify for the exclusion if either spouse is 55 or older on the date of sale.

Q: I missed the boat when "indexing" began to be linked with pensions and other benefits. I assume it means that the benefit is hitched to the CPI or some such, but would like to know for sure. Why was "index" chosen instead of some clearer word like "escalated?"

A: There really are two different definitions of the word "index" involved here -- both valid. (Source: Webster's New World Dictionary of the American Language).

The letters "CPI" stand for "Consumer Price Index," and in this context "index" is defined as "a number used to measure change in prices, wages, employment, production, etc.; it shows percentage variation from an arbitrary standard, usually 100, representing the status at some earlier time."

When we talk about indexing retirement pay or social security benefits or the tax rate schedules, we're applying another definition: "the relation or ratio of one amount or dimension to another, or the formula expressing this relation."

For example, when the CPI rose 7.2 percent for 1981, on the next social security adjustment date (July 1, 1982) benefits were increased by the same 7.2 percent. That's because social security benefits are "indexed" to the CPI on a one-to-one basis (1:1 for you mathematicians).

In their efforts to resolve the fiscal problems of the system, if the Congress should decide that social security benefits will be increased by only 80 percent of the annual CPI increase, the benefits would still be indexed but the ratio would be different (4:5 instead of 1:1).

It's really arrived! In this town with such a high percentage of two-income families, I thought you might be interested in knowing that I have seen an advance copy of Schedule W for the 1982 individual income tax form 1040.

"What's Schedule W?" you ask? That's the form for claiming the special deduction to reduce what's been called the "marriage penalty tax" -- the extra tax cost levied against working spouses compared to two single individuals with the same income.

For 1982 you will subtract from taxable income 5 percent of the net earned income of the spouse with the lower earnings. ("Net earned income" is gross earnings minus some deductions like employe business expenses and contributions to an IRA or Keogh plan.)

I bring you this bit of information as a way of reminding you that it isn't too early to be thinking about your 1982 taxes. In fact, tax awareness should be an essential part of your financial planning all year.

In a couple of weeks I plan to write more specifically about some of the things you should be looking at, particularly in the light of the changes wrought by the 1981 and 1982 tax acts.