Q: In early 1985, my wife and I invested $2,000 each in IRAs with a local company. Last fall, the company manager was indicted for fraud, and the Justice Department attorney handling the case said neither the company nor its manager had any assets left. I can't believe the advice I received from the IRS, that because the earnings from the money invested were not subject to tax immediately, the loss can't ever be deducted. Is that answer correct? And can we invest another $2,000 each in replacement IRAs?

A: Yes, the IRS is correct, although the reason you cited is not right. You can't claim a tax loss on the bad investment because you already are claiming the $4,000 as an income adjustment on your tax return. I'm sure you can understand the logic of not being permitted to deduct the same $4,000 twice from your taxable income.

Your investment was similar to a self-directed IRA -- an IRA account with a broker in which you make your own investment decisions. Neither gains nor losses on transactions in the account are included in your tax return; instead, the results are reflected in the value of the account and taxed when withdrawals are made.

For essentially the same reason, you may not invest another $4,000 in an IRA for 1985 to replace what was lost; the $4,000 you deducted on your 1985 return for the investment that turned sour is the maximum allowable ceiling for the year.

I must believe that the principal -- if not the only -- reason for going with this company was the prospect of high yield. You've learned your lesson the hard way; for other readers, let me caution again that risk goes along with reward. If an investment offers a potential for a yield that is higher than those generally available, please believe me that invariably the risk is going to be higher too.

If you are not prepared to accept the greater risk of loss that goes with the high flyers, stay with the more conservative investments for your IRA, such as certificates of deposit, insurance annuities and income-oriented mutual funds. Don't be tempted by the big bucks promised unless you really understand what you're getting into.

Q: My husband did not escape from Vietnam the day my son and I were rescued by the United States. Since then (1975) I have claimed only two exemptions on my tax return (for my boy and me). I'm still trying to support my husband, who is living in Vietnam. My question: May I claim my husband as one more exemption on my tax return?

A: I have never dealt with this question before, so I can't draw on previous experience to assure you that I have the right answer. Based on my research, however, I think the situation shapes up like this:

*You may not claim your husband as a dependent because he does not meet the test of being a U.S. citizen or resident at any time during the year. (I have assumed that your husband is not a citizen, based on the information in your letter.)

*If your husband in Vietnam had no income during the year, you may file a joint return, in which case you get a taxpayer exemption, rather than a dependent exemption, for him. (Another assumption I made is that you now file as head of a household.)

*If your husband had some income, you may still file a joint return, providing you agree to be taxed on your total combined income worldwide. (It would pay to do this if his Vietnam income were quite low, as it apparently is.)

*If you elect to file a joint return, and cannot obtain his signature, you may sign in both places and attach a statement explaining why your husband was unable to sign the return.

In addition to giving you the extra taxpayer exemption, a joint return uses a lower tax-rate schedule than the head-of-household status. You may want to seek another opinion, either from the IRS, from an attorney who specializes in similar situations or from a Vietnamese support group.

If you decide to go the joint return route, you still may file amended returns for 1983 and 1984 to request a refund of your overpayment. Use IRS Form 1040-X to show the new, lower tax, and explain the reason in the space provided on the back.