Discussion:HOH & married & community property
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Discussion Forum Index --> Advanced Tax Questions --> HOH & married & community property
Discussion Forum Index --> Tax Questions --> HOH & married & community property
| April 28, 2009 | |
| Hello >> taxpayers are married but lived apart for all of 2008 in Texas, a community property state. One qualifies to file HOH. I am having a problem splitting their return (into an HOH and an MFS).
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| 28 April 2009 | |
| Under Sec. 7703(b) the HOH spouse is not considered married - I gather at least one qualifying child is residing with that spouse. | |
| April 28, 2009 | |
| Thank you Solomon. Yes, the TP has one qualifying child. I understand the HOH spouse is not "considered married" for purposes of determining if they qualify to take the HOH status. However, for purposes of allocating community income/deductions, I am wondering if the married status of the HOH filer would preclude them from taking $3k capital loss when their spouse is taking $1,500. Everything I am reading is pointing to the married couple being able to claim net losses of $4500 total versus the $3000 limitation that would normally apply. Do you agree that $4500 losses total should be permitted? | |
| 28 April 2009 | |
| From ยง1.1212-1(c)(iii)
"If a husband and wife make separate returns for the first taxable year beginning after December 31, 1963, or any prior taxable year, and they made a joint return for the preceding taxable year, any capital loss carryover from such preceding taxable year shall be allocated to the spouses on the basis of their individual net capital loss which gave rise to such capital loss carryover." | |
| 28 April 2009 | |
| See Example 2 in that part of the Reg. for the computation. | |
| April 28, 2009 | |
| Ok. But this still does not address the issue of the TOTAL net losses allowable between an HOH & an MSF filer. I am not concerned about how to allocate the losses between the two. My question remains how much may each take. Assume the HOH filer has $3,000 of net losses, properly allocable to the HOH filer. The MFS filer has $1500 net losses, properly allocable to the MFS filer. Should they be able to claim $4500 total between the two of them? | |
| 28 April 2009 | |
| It has been my understanding that if the spouse qualifies for HOH, then she/he is treated that way in all areas, no forced itemized deductions, no limits on capital losses, student loan interst etc. So I do believe you are correct in the total loss between them being $4500. | |
| 28 April 2009 | |
| I don't see why you can't take them, the sections that allow them are all the support you need since the MFS status does not apply. i.e. 25A(g)(6) | |
| April 28, 2009 | |
| Gary, I don't know what you are referring to when you cite "25A(g)(6)", but I agree with EZ and will proceed accordingly. | |
| 28 April 2009 | |
| If one spouse qualifies for HOH, then does the other spouse not qualify to be SINGLE?? Then if the logic of the above statments is right, would there not be the possibility of getting $6000 in losses between the 2 ??? I have never run into this situation as far as the capital loss situation and I have not dealt with a taxpayer in a community property state (I am in NY)...... | |
| 28 April 2009 | |
| Ah EZTAX....I was posing the question to BEGooding hoping that maybe he left out the detail about the couple being legally separated.....most couples who decide to live apart get legally separated rather quickly and since they have been apart for the entire year I thought that might be likely. Legal separations are determined by state law so maybe there is no such thing in Texas???
We both know that if the couple is legally separated on Dec 31st, then they are considered "unmarried" for the entire year which is the criteria for getting both of them the more favorable SINGLE status. The even more favorable HOH status is also available if there is a qualifying person involved, etc, etc and also in the absence of the legal separation if the spouse has not lived in the home for the last 6 months....in that case, then you are correct EZTax, the other spouse would be stuck with MFS. So back to the topic....if they were legally separated, would they both then qualify for $3K in losses? What if the accounts generating the losses are jointly owned and not easily allocable to each individual?? | |
| 28 April 2009 | |
| Kbairtax,
I believe you are correct. Texas does not have the concept of legal separation. | |
| April 28, 2009 | |
| There is no such thing as "legal separation" in Texas. But in certain other states that recognize legal separations, then I expect both could file as single if they were legally separated on 12/31. | |
| 28 April 2009 | |
| Good thing to know.....sorry for your client stuck with MFS....that's too bad. | |
| 28 April 2009 | |
| Just to clarify what I believe Karen (Kbairtax) to be saying - she seems to be using the term "legally separated" as a shortcut for the legal phrase "legally separated from his/her spouse under a decree of divorce or of separate maintenance" and not in the way that many separated couples who do not yet have a decree of any kind might use the phrase in the period leading up to their divorce.
I thought it might be important to clarify that for later readers who wouldn't be as familiar with the code sections linked in the first couple of posts above, or with Publication 17, and therefore might jump to the conclusion that taxpayers can claim "single" status as easily as they might claim "HoH" status (well, even that's not easy, as apparent from the rules in the links and posts above) if separated from their spouse pending a decree. (Not to put words in your mouth Karen - if this is not what you were saying, please post again. Thx.) | |
