Bad day at Black Rock! I'm referring to May 4 -- the Monday morning when the column included a whole year's worth of errors.

(1) In answer to a question about using an SEP-IRA rather than a Keogh for a self-employed person, I wrote that the maximum contribution to the SEP is 15 percent of earnings with a $7,000 ceiling. This $7,000 ceiling -- the result of a new provision of the 1986 Tax Reform Act -- applies only to employe contributions to an employer-sponsored SEP (in a small company -- under 25 employes). The annual ceiling on an SEP-IRA for the self-employed is in fact $30,000, corresponding to the limit on Keogh contributions.

(2) In that same item, I used the date "Dec. 31, 1986" when referring to use of the old 10-year averaging technique for lump sum distributions. Instead, anyone who was 50 or older by Jan. 1, 1986, may elect the old method (using 1986 tax rates) in lieu of the new five-year averaging mandated by the Tax Reform Act for distributions after the Dec. 31, 1986, date.

(3) Answering a query about a tax deduction for transfer taxes paid in connection with the purchase of rental real property, I cited IRS Publication 527 as authority for requiring that such transfer taxes be capitalized -- added to the cost basis of the property -- rather than being currently deductible. It turns out that publication and IRS Publication 17, which says the same thing, are both wrong -- and so was I.

Here are the correct facts. (a) Transfer taxes paid on the purchase of your personal residence are in fact not deductible and must be added to the cost basis. (b) If you're in the real estate business, transfer taxes are deductible from gross income as an expense of doing business (that is, on Schedule C or your corporate tax return). (c) Transfer taxes paid on real estate purchased for the production of income (but not as part of a trade or business) may be deducted in full on Schedule A as an itemized investment expense.

The original question dealt with property acquired in June 1986, and the corrected information just above applies. Would you believe that the Tax Reform Act changes the rules? For purchases after Dec. 31, 1986, my original answer was right: Transfer taxes paid on the acquisition of property in 1987 and later, even if purchased in a trade or business or for the production of income, must be treated as a part of the cost and added to the basis.Q As seniors, we decided to sell our home and relocate to a condo apartment. Settlement on the condo preceded settlement on the house by a few months; we temporarily borrowed the funds needed to close on the condo from the margin account at our broker. These funds were repaid after closing the sale of the house. Since the interest cost of the margin loan was incurred to buy the condo, is it deductible in the same way as mortgage interest would be? A No. Although you know the money was used as an "interim mortgage," there was no such restriction on the funds when you made the margin loan. In addition, the loan was secured by the securities in your account, not by the home itself -- a necessary component in the definition of a mortgage. The interest on the margin loan is investment interest, still deductible on Schedule A but only to the extent of investment income.

However, this restriction on the deductibility of investment interest is phased in over a five-year period. For 1987, 65 percent of "excess" investment interest may be claimed anyway; and any unused balance (of that 65 percent) may be carried forward to 1988, to be applied against investment income then. The allowable portion of otherwise disallowed interest reduces to 40 percent in 1988, 20 percent of 1989 and 10 percent in 1990. Q Can a one-year certificate of deposit offer tax-deferred benefits just like a Treasury bill (that is, the interest is reported at maturity)? At the IRS I was told that since I can withdraw the CD at any time, I'm receiving "constructive interest" that is taxable. A You were told wrong at the IRS. Although you may terminate the CD before maturity, it is only at the cost of an early withdrawal penalty. If the interest is not normally available to you until maturity, tax liability is deferred and the income is not reported for tax purposes until the year of receipt.