If my mother cashes shares, can I claim her as a dependent?

This answer was provided by Mark Misselbeck, CPA, from Levine, Katz, Nannis & Solomon PC in Needham.

Q: I currently claim Head of Household because I support my elderly mother. Recently, she received shares from John Hancock when John Hancock became a public company. How can she turn this into cash without impacting my ability to claim her as a dependent? Can she give this as a gift? - Anonymous

A: Merely receiving assets does not disqualify the person as a dependent nor you from claiming Head of Household status. Unlike the standards for public support (welfare payments, Section 8 housing or Medicare/Medicaid), tax rules require you to supply more than half of the support of your parent, they have no more gross income than their personal exemption amount ($ 3,050 for 2003) and provide more than half of the cost of their home in order to claim Head of Household filing status.

You would need to calculate your parent's taxable income for 2003 by including only the gain that is recognized, due to any sale of the shares received, together with interest, dividends, IRAs, pensions and taxable Social Security benefits to see if more than $ 3,050 was received that would disqualify you from claiming an exemption for them that would disqualify you from claiming this filing status.