DEAR BOB: We just bought a house using a wraparound mortgage. Each month we pay our seller $990 and he uses $322 of this to keep up the payments on the old, underlying GI first mortgage. How can we be sure the seller is making these payments and not pocketing the cash? -- Mrs. C. V., Annandale.

DEAR MRS. C. V.: Each month send your seller two checks. Make one payable for $322 to the first mortgage lender and one payable to the seller for the $668 balance. When the $322 canceled check comes back from your bank, you'll know the payment was made.

DEAR BOB: My elderly father has rented out his house for over a year. He has been living with us. Now we have talked him into selling the house so he can afford to move to a luxury retirement home where most of his friends live. Although he has little taxable income, the sale profit will be large (about $85,000). Is it too late for him to use that $100,000 tax exemption you often discuss? -- Eva T., Arlington.

DEAR EVA: No. Your father is still eligible if he owned and lived in his principal residence any three of the five years before its sale. Assuming he is 55 or older and has never used this $100,000 home sale tax break before, your father's $85,000 profit should qualify for total tax exemption. Ask your tax adviser to explain further.

DEAR BOB: My wife is 64 and I am 69. We like our house and have no plans to move. But we have about $80,000 profit tied up in it. My son, age 24, wants us to sell it to him for nothing down. Our sale profit would be tax-free, using that "over 55," $100,000 exemption you often discuss. My son is a CPA with a high income for which he needs tax shelter. His idea is to pay us monthly mortgage payments and we, in turn, would pay him the fair market rent on the house. The result, he claims, would be tax shelter from depreciation for him plus tax-free income (except for the interest) to us. Is this a good idea? -- Harmon H., Falls Church.

DEAR HARMON: Maybe. The potential problem is that the IRS feels family rentals to close relatives are grounds for disallowing depreciation deductions to the landlord. Your son may not get the tax shelter he is expecting. f

Congress is expected to change this IRS ruling, so watch for action soon on this "hot topic" of disallowance of depreciation on family rentals.

DEAR BOB: Many years ago we bought our home for just $17,000. Today it is worth well over $175,000. But we hesitate to sell because of the profit tax. Our banker suggests that we sell so we can move to a better climate, since we are 84 and 81 years old. He says we can take that $100,000 home sale tax exemption on the first $100,000 of our profits, and suggests an installment sale for the balance. What do you think about this idea? It would give us enough income to afford the monthly payments at a plush retirement home in California? -- Floyd T., Bethesda.

DEAR BOB: Your banker has an excellent idea. By using the "over-55 rule," the $100,000 home sale tax break, you avoid tax on $100,000 of your $158,000 profits. Taking back an installment sale first or second mortgage will let you spread out the proifit tax on the $58,000 balance of your sale profit.

In addition, you'll earn retirement interest income on the buyer's unpaid balance (interest is taxed as ordinary income). The happy result is that you postpone the profit tax on $58,000 of long term capital gain, thus avoiding a boost into a high tax bracket in the year of the sale. Ask your tax adviser to explain further.

More details are in my report, "Everything You Want and Need to Know About the $100,000 Home Sale Tax Exemption." To obtain a copy, send a $2 check payable to "Newspaperbooks" for Report 80107 to The Washington Post, P.O. Box 259, Norwood, N.J. 07648.