Discussion:Can I claim all deductions, while my partner files a 1040-EZ?

Again, I've done this since tax year 1998, so am I looking for trouble? Am I doing anything wrong?

Any expert opinions would be welcome.

As it is, and has been for the past 9+ years, our (my) itemized deductions are slightly less than our combined standards. Taking all of the deductions myself, and claiming standard for my partner, gives us a total of about 1.5x our combined standards.

We're not in a CP state, so I think what I'm hearing is that it'd be better (IRS-compliance-wise) for us to split all deductions 50/50, in which case we'd do better if we were to each take our standard.

Would there be any red flags raised over the fact that I itemized every year, from 98 through 2006, and now for 2007, I'd be going standard?

Thanks again.

No, IRS does not select returns for examination by making such a comparison. However, if your prior year returns claimed unallowable itemized, you should amend open years (2005-06).

Can I claim 100% of all deductions (mortgage interest, taxes, charitable) on 1040 Schedule A, while filing a 1040-EZ for my partner, with whom I share a Joint Tenant interest in all accounts and debts? We'd rather not split anything.

After we get this settled, I'll need to ask about Ordinary Dividends. I bet you can't wait.

Thanks again, to all of you.

The simple solution to your problem is to get married. Won't help for 2007, but it will fix it for 2008.

At any rate, the decision to do it this way was based more on wanting to avoid the pain-in-the-a** of splitting everything. The fact that it nets us a larger combined refund is an unintended bonus, and one I'd hate to give up.

More thoughts?

Though I don't know what kind of documentation I'd need were the wolves to come scratching at my door, I am comfortable with taking 100% deductions on my own return. That's my story, and I'm sticking to it.

Thanks, again.

Does holding the property as tenant with right of survivorship change the general rule?

Does holding the property as husband and wife change the general rule?

In Ewell v. Commissioner T.C. Memo 1996-253, the Court addressed a husband and wife. The Court states the property is held jointly and that the petitioner and former spouse were jointly liable for the mortgages and property tax.

The husband paid more than his proportionate share. The IRS took the position that the husband could only deduct his proportionate share.

Respondent contends that petitioner may not deduct his payments of his former spouse’s share of mortgage interest and property taxes because he has a right to be reimbursed by her. Respondent contends that Levy v. Commissioner, 2121 F. 2nd 552, 554 (5th Cir. 1954, affg a Memorandum Opinion of this Court dated March 9, 1953; Estate of Boyd v. Commissioner, 28 T.C. 564, 566-657 (1957); and Conte v. Commissioner, T.C. Memo 1981-571, affd 722 F. 2nd 727 (2d Cir 1983), supporting this contention. We disagree.

The Court in the Ewell does not agree and distinguished the present case on the facts.

1. These earlier cases only ruled on repairs, maintenance, and capital improvements and not on expenses where the co-tenants were jointly and severally liable.

The Court mentions that in contrast to the case before it, the IRS in Conte the had concede that the taxpayer could deduct real estate taxes and mortgage interest to the extent he paid them because he was jointly and severally liable for those deductions.

So, the Court in Ewell could have ruled here that simply because the Taxpayer was jointly and severally liable, that the Taxpayer was entitled to deduct what the Taxpayer paid. But it did not.

Instead, the Court goes on to say that the earlier cases did not address where the other party was able to contribute or reimburse the Taxpayer for their share.

And the Court rules that Petitioner could lose the properties if the mortgage interest and property taxes were not paid.

So instead of simply ruling that Husband could deduct the payments because he was jointly and severally liable, the Court felt compelled to make a further and went on to rule that he could deduct it because it was ‘highly unlikely’ he could collect from his wife (she was in bankruptcy).

This is the general rule.

There is a Rev. Ruling, 71-268, regarding property held as tenancy by the entirety that says, “since H and W are liable jointly and severally for payment of interest on the indebtedness on the property they hold as tenants by the entirety, the amount of interest actually paid by W during 1969 is deductible on her separate return. So, the Rev. Ruling actually supports the Taxpayer deducting the payment regardless of whether the co-tenant can reimburse the Taxpayer. The Court in the Ewell case did not cite this Rev Ruling.

   Rev. Ruling 71-268 is cited by the Court in Blackburn v. Commissioner TC Memo 1979-266 for the proposition that if a husband and wife are jointly and severally liable, then whoever pays the interest and taxes is entitled to the deduction.

   So there is a line that supports whoever pays the expense is entitled to the deduction regardless of the issue of inability to pay of the other cotenant.

   But look at the dates on the cases.

   From a common sense point of view two people who are living in a house could both contribute equally, but by allowing the one tenant to pay the deductible interest and taxes allow for a shifting of the deduction to the person in the highest tax bracket.  The next year they could alternate.

   With a partnership could I shift the deductions like this? Assume both partners are liable for the mortgage interest. Partner A pays 10,000 for deductible mortgage interest paid with his funds, while Partner B pays for an asset that cannot depreciated or amortized out of his own personal separate funds.  Will the IRS allow a special allocation in this case?  Could A * B change place the next year?