You're asking how to determine if an object is occluded. Here's a simple method:
(1) Take the sun's screen x and y
(2) Use 'pick object' with those coordinates
(3) Check if the object is the sun (or sky box, or whatever you're using to display your sun).
(4) If it is, proceed to step 6
(5) It's not: hide your "flare" object; do not proceed with the following steps.
(6) Show your "flare" object.
(7) Apply your fade operation.
I can't tell what you're looking for (in terms of "fade") here, exactly. It's hard to tell without context. Are you trying to do lens flare?
Cheers,
Aaron
EDIT: PS: I make no claims of efficiency for my method, btw. There are things you can do, like only checking every 'x' frames. Checking if the object is even in view before doing any of these operations. etc.