- 20 -
105-599, supra at 252-253, 1998-3 C.B. at 1006-1007. The
following examples are provided in the conference report:
For example, a married couple files a joint return
with wage income of $100,000 allocable to the wife and
$30,000 of self employment income allocable to the
husband. On examination, a $20,000 deduction allocated
to the husband is disallowed, resulting in a deficiency
of $5,600. Under the provision, the liability is
allocated in proportion to the items giving rise to the
deficiency. Since the only item giving rise to the
deficiency is allocable to the husband, and because he
reported sufficient income to offset the item of
deduction, the entire deficiency is allocated to the
husband and the wife has no liability with regard to
the deficiency, regardless of the ability of the IRS to
collect the deficiency from the husband.
If the joint return had shown only $15,000
(instead of $30,000) of self employment income for the
husband, the income offset limitation rule discussed
above would apply. In this case, the disallowed $20,000
deduction entirely offsets the $15,000 of income of the
husband, and $5,000 remains. This remaining $5,000 of
the disallowed deduction offsets income of the wife.
The liability for the deficiency is therefore divided
in proportion to the amount of income offset for each
spouse. In this example, the husband is liable for 3/4
of the deficiency ($4,200), and the wife is liable for
the remaining 1/4 ($1,400). [H. Conf. Rept. 105-599,
supra at 252-253, 1998-3 C.B. at 1006-1007.]
The allocation in the above example is made without reference to
whether the husband, the wife, or both elect relief under section
6015(c).
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011