Q: Regarding your very informative article on tax-deferred utility dividends, would you please clarify further the following situation: If all shares (original and reinvested) are sold at one time, less than a year after the reinvestment program ends, what would be the tax treatment and cost basis for each category of shares? Also, please tell me in what IRS publication I can find a complete explanation of the dividend reinvestment program.

A: In the circumstances you describe, you would have three different kinds of tax reporting. First, you would report as ordinary income ("other income" on page 1 of Form 1040) the net sale proceeds of those reinvested dividend shares received during the 12 months preceding the sale.

Next, you would report as a long-term capital gain the net sales proceeds of those dividend shares that had been reinvested more than one year before the date of the sale.

Your basis for these shares is zero, so the entire proceeds (after brokerage fees) is reportable -- although, of course, you will only pay tax on 40 percent of the gain, as in any long-term sale of a capital asset.

And, finally, you report as a separate long-term transaction the sale of the original shares -- which presumably have been owned for more than a year.

You follow the normal rules for determining basis, in most cases, cost plus broker fees (but probably different if you received the shares as a gift or bequest).

The IRS has not issued a separate publication directed specifically at the utility dividend reinvestment program. You can find some information -- but not the complete story -- in Publications 17 ("Your Federal Income Tax") and 550 ("Investment Income and Expenses").

Q: My bank has recently instituted a $5 per-envelope charge to process bond coupons. Can I send the coupons directly to the issuer for payment, or is a go-between required?

A: You may certainly send your bond coupons directly for payment; an intermediary is not required. However, the interest coupon on an unregistered bond should be handled like cash, since it is redeemable by anyone who has possession.

So, if you send the coupon in for payment yourself, it should go by registered mail, with return recipt requested. You're looking at a postal charge of at least $4.30 -- more if the interest coupon is valued in excess of $100. It may be worth the $5 to have the bank take care of it for you.

There is another alternative. If you have either a regular or cash-management account at a full-service broker, the broker will service the coupon collection for all bonds in that account without charge. (At Merrill Lynch -- and perhaps at other brokers as well -- the interest is credited to your account on the date it is due, even though it is not actually collected until some days later.)

Some of the discount brokers -- including Charles Schwab & Co. -- offer the same collection service. Of course, the size and activity level of your portfolio may not warrant opening a brokerage account; but this is an option worth considering.

Q: In the spring of 1985, I invested $4,000 in a business for my son. The business is going under. Can I take a loss this year on my taxes?

A: Yes -- but the form of the "investment" determines the manner in which you can claim the loss. For example, if the business was incorporated and the $4,000 went to buy shares of stock in the corporation, then you will have a capital loss as of the last day of the calendar year in which the shares become worthless. Given your timing, this would be a long-term loss, and you would end up claiming only 50 percent of the total.

On the other hand, if the $4,000 was in the form of a personal loan to your son, then you have a personal bad debt. This loss will also appear on Schedule D, but will be short-term -- and thus deductible in full -- regardless of the elapsed time.

Regardless of the circumstances, you will need to have evidence of the zero value -- perhaps your attempts to have a loan repaid, or the business failure to demonstrate the worthlessness of stock shares.