Last-minute reminder: If you're self-employed and have a Keogh retirement plan, for most of you an annual report to the IRS is due by July 31. (The technical due date is the last day of the seventh month following the end of the fiscal year, which corresponds to the calendar year for individual taxpayers.)

About a year ago, writing on this subject, I said that I couldn't understand why single-participant owner-employe plans were not exempt from the report, which is intended primarily to ensure funding protection for employe participants. Although I'm sure my words don't carry much weight with the IRS, it has simplified the rules.

Instead of the five-page Form 5500-C, the much shorter Form 5500-R may be filed for one-participant pension plans, including the Keogh plans of self-employed individuals with no employes. Form 5500-R is an information return only and does not require the dollar-amount calculations sought on the longer form.

But the requirements for filing and the July 31 due date have not changed, so if you have a Keogh plan based on your earnings from self-employment, get with it -- you have only a few days left to get your return in the mail.

Q: In your column of May 26, you answered a question about how donees of stocks determine their cost basis for tax purposes if the stocks increased in price after the gifts were made.

Your answer was clear except for one thing: Your several references to the donor's "adjusted basis," which appears to be a key element. I don't understand the meaning of this expression and suspect that many other readers don't, either. Perhaps you could clarify the meaning in a future column.

A: Normally, the donor's basis is the original cost for the shares given as gifts. In some cases, however, that cost must be modified to arrive at the true basis for figuring gain or loss. An adjustment must be made for any occurrence that affects the capital basis of the stock.

I know that sounds like gobbledygook and really doesn't "clarify the meaning," as you requested, so let me give you a couple of examples.

A dividend reinvestment plan may provide for a discount (usually 5 percent) from market value for shares accumulated under the plan. The shareholder is required to include that discount in the total amount of the dividend reported as income on his or her tax return. The basis of the dividend shares is not the cost, but the cost plus the discount reported -- in other words, the shareholder has an "adjusted basis."

Another example: A utility reports to its shareholders that some percentage of the previous year's dividends represents a return of capital. That part of the dividend should not be reported as taxable dividend income. It is used instead to reduce the basis of the stock -- thus giving an "adjusted basis."

The meaning may be easier to grasp in connection with a home. If you add, say, a patio, then your original cost basis in the house is "adjusted" by the cost of the addition.

I wish I could give you a clearer definition, but I can't come up with anything, so perhaps these examples will help you to understand the concept of "adjusted basis."

Q: I own a rental town house and deduct, as an expense on Schedule E, the interest I pay on the mortgage. I now have substantial equity and would like to tap some of it for personal use. Is there any prohibition against taking a second mortgage, using the proceeds for purposes not related to the house but claiming that interest also on Schedule E?

A: No problem -- there is no requirement that the proceeds of a mortgage be applied to the house on which the loan is taken. And although the proposed tax package now working its way through Congress would change the rules governing the deductibility of interest expense, it appears that those changes will affect Schedule A deductions and have no impact on rental property interest claimed on Schedule E.

Abramson is a family financial counselor and tax adviser. Questions of general interest on tax matters, insurance, investments, estate planning and other aspects of family finances will be answered in this column. Advice cannot be given on an individual basis. Address all questions to E. M. Abramson, The Washington Post, Business News, 1150 15th St. NW, Washington, D.C., 20071.