Q: We purchased a condo six months ago and are now displeased with the location and the fact that it isn't as soundproof as we want it to be. We want to purchase elsewhere and rent this unit out. What tax write-offs would we be able to claim at the end of the tax year?

A: The basic rule is that you may claim all "ordinary and necessary" expenses associated with the rental property.

That tax man's jargon isn't really very helpful, so here are some of the principal expenses you may deduct:

Interest on a mortgage; real property taxes (your share should be reported to you every year by the condo management); casualty insurance; condo fee; repairs and maintenance; rental agent's commission and management fees, and, finally, depreciation.

If you rent the unit furnished, you may depreciate the furniture separately from the property itself, and over a shorter period.

Pick up from the IRS free copies of Publication 530, "Tax Information for Owners of Homes, Condominiums, and Cooperative Apartments," and, even more helpful, Publication 527, "Rental Property."

Q: I invested in several municipal investment trusts with a large brokerage house. In 1984 I received, in addition to monthly interest payments, small amounts of principal payments. Then this year, I received a copy of a statement sent to IRS titled "sales, redemptions and return of principal." Since there is neither a gain nor a loss on these principal payments, where do I show them on my 1040?

A: You don't report this information on your 1040, or on any other IRS form. Instead, you apply the amount of any return of principal to reduce your original cost basis.

If your cost is reduced to zero, then any further return of principal would be reported on Schedule D as a capital gain. This might happen with other forms of investment, but it won't happen with a municipal investment trust -- so just keep track of your reducing cost basis; you have no liability to the IRS for these payments.

The authority for not reporting a return of principal is page 52 of IRS Publication 17, "Your Federal Income Tax." However, you may infer a different answer if you look at Schedule B and read the instruction booklet that accompanied your tax forms.

It appears there that you should report the return-of-principal distribution on line 4 of Schedule B ("Dividend income"), then subtract it from total dividends by entering the same amount on line 7, "Nontaxable distributions."

If you don't otherwise need Schedule B, simply keep track of reducing cost basis and don't report the distribution at all. If you use Schedule B for other dividends, then take your pick; either method is correct, and you end up at the same place anyway.

Q: Would you please tell me if, in the event of financial liability, the retirement funds in a Keogh or IRA account at a savings and loan association are attachable? If so, are there any ways to protect retirement funds from a liability claim?

A: According to the Commerce Clearing House guide to "Financial and Estate Planning," funds in a Keogh plan or IRA are not insulated from creditors because in most cases the depositor-beneficiary may withdraw the money in the account at any time, subject only to payment of the necessary taxes.

CCH points out that the result might be different if the terms of the retirement plan specifically denied the depositor the right to withdraw the funds.

Because Keoghs and IRAs have not been around many years, there is not yet a totally definitive body of case law. I suggest you consult an attorney for further guidance.