- 11 - provides for the reallocation of erroneous items to the extent one spouse received a tax benefit on a joint return and the other spouse did not. The Secretary has promulgated regulations prescribing such rules.3 Section 1.6015-3(d)(2)(i), Income Tax Regs., provides: “An erroneous item that would otherwise be allocated to the nonrequesting spouse is allocated to the requesting spouse to the extent that the requesting spouse received a tax benefit on the joint return.” This rule applies equally to items that would otherwise be allocated to the requesting spouse. Hopkins v. Commissioner, 121 T.C. 73, 82-86 (2003). Section 1.6015-3(d)(5), Example (5), Income Tax Regs., provides: Example (5). Requesting spouse receives a benefit on the joint return from the nonrequesting spouse’s erroneous item. (i) In 2001, H reports gross income of $4,000 from his business on Schedule C, and W reports $50,000 of wage income. On their 2001 joint Federal income tax return, H deducts $20,000 of business expenses resulting in a net loss from his business of $16,000. H and W divorce in September 2002, and on May 22, 2003, a $5,200 deficiency is assessed with respect to their 2001 joint return. W elects to allocate the deficiency. The deficiency on the joint return results from a disallowance of all of H’s $20,000 of deductions. (ii) Since H used only $4,000 of the disallowed deductions to offset gross income from his business, W benefitted from the other $16,000 of the disallowed 3The regulations are applicable for all elections or requests for relief filed on or after July 18, 2002. Sec. 1.6015-9, Income Tax Regs. In the case at bar, petitioner elected relief in the second amendment to petition filed on May 22, 2003.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011