Splitting Attributes

[Snaggletooth]

Carryforwards are not popular when there is a divorce.

Is it possible to prorate carryforwards in a fashion other than 50-50? Three possible items inherited from previous years: 1)capital loss carryforwards 2)state tax refunds 3)NOLs. There are many, many more than these.

Example: there is a $275,000 capital loss carryforward. Wife lost $75,000 in the stock market 3 years ago. Husband lost $200,000 in international currency exchange. But all securities were owned with beneficiary rights to the other, even though operated separately.

Have edited to pose the question as a choice of the following:

1) Loss carryforward is an allocation of $75K to wife and $200K to husband.
2) Loss carryforward is 50-50, i.e. $137,500 to each spouse
3) Allocation is prescribed by a ratio of the respective incomes (IRS has specified
how to split by creating tax liabilities at MFS rates, and then splitting in THAT
proportion.
4) Loss carryforward allocation can be negotiated between the parties.

[Lion]

Different Animals

Different strokes for different folks.

Capital Loss Carryforwards belong to the party that generated each amount, who owned the account, in your example it's 1). (If one spouse died instead of divorcing, his/her Carryforward dies too after final return.)

I think State Tax Refunds would be 50/50 or based on relative state income from the year of the refund. I have NY commuters/CT residents where only one spouse has NY-sourced income and signs the Certification; I think that refund would go to the one who earned the NY income. I'm kinda remembering that the couple has some leeway in deciding how to dole this out, with maybe 50/50 if they can't agree? But, I'd have to look this up if and when I have this situation.

NOLs go to the person who generated the NOL via his/her business loss. Again, there could be more than one NOL from more than one spouse.

[Burke]

You can allocate the state refund 50/50 or percentage based on individual AGI.