Home sale proceeds rollover not limited to same spouse
Article Abstract:
The fourth circuit court reversed the decision of the Tax Court in a 1997 case by ruling that a woman who resided in and sold her old house with her ex-husband, but who has married again, is allowed to treat her present husband's share of the cost of their new, replacement home as her own under Sec 1034. Before the Taxpayer Relief Act (TRA) of 1997 was enacted, Sec 1034 gave taxpayers the right to recognize the gain they made on the sale of a main residence if they purchased a replacement home two years after the sale. Moreover, Sec 121 allowed a one-time exclusion of up to $125,000 of the gain for those who turned 55 before they sold their main residences. The TRA has removed these privileges but allows taxpayers to rely on the old rules for certain sales of homes. The court held that Sec 1034 did not require a taxpayer to live with the same spouse in the two residences. Moreover, the same-spouse provision was found to be invalid.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1997
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Definition of an innocent spouse still uncertain
Article Abstract:
The liability for tax falls on both a husband and wife who file a joint return, although it is possible to assess the full amount of the liability against only one of the spouses. In general, a spouse cannot be relieved of the tax liability even after disavowing a joint return filed by the other spouse who had made erroneous deductions or omissions from income. The IRS can argue that the innocent spouse, although lacking knowledge of the gross understatement of tax, has benefited from the understatement because the resultant tax savings could be applied to lessen household debts, raise divorce settlements or finance recreational activities. However, Section 6013(e)(1) will allow a spouse to be relieved of the joint tax liability provided that several conditions are satisfied. These requirements for relief are briefly discussed.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1993
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Child care credit
Article Abstract:
A question on the child care credit taken from the certified public accountant examination is answered and the rationale for selecting the right answer is provided. The question deals with the criteria needed to determine if a spouse filing a joint return is eligible for the credit. The answer is that the only relevant criterion for eligibility is that at least one spouse should be gainfully employed. Other criterion for claiming the child care credit for expenses related to the care of children under the age of thirteen are discussed. These include types of qualified expenses, the calculation of the child care credit, and the IRS requirements covering information on the providers of child care.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1993
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