Spouses Personal Exemption on Deceased MFS return

[KathMorgan]

How can a spouse, with no gross income, be claimed as a personal exemption on the deceased taxpayers final MFS return and her new husbands MFS return for the year they marry which is the same year the previous taxpayer dies?
While studying the Wiley manual mailed to us my study group ran across something that is counter to our training. Research on the IRS website backs up the Wiley manual. The Wiley manual page 26, IRS Pub 17 page 26 and IRS Pub 501 page 26 all say that the spouse CAN be claimed as a personal exemption on both returns.
Beside the fact that is counter to everything we have been taught about a personal exemption only being able to be used once a year, the rules say that to claim a spouse on a MFS tax return the taxpayer must provide more then 50% of the support for the spouse and no one else can be able to claim the spouse as a dependent. By definition, if one of the taxpayers (either the deceased or the new) provided more then 50% of the support for the spouse and can claim her as an exemption then the other one can not. We are confused!!!

[taxmom34]

why can't she file MFJ with new husband? if she did that i would not claim her on dead spouse's final return. i don't understand why new husband is filing MFS? did his spouse die too?

[Burke]

My question exactly. She has no income, so there is no reason not to file MFJ with 2nd hubby if she remarried before the end of the tax year. Unless there is something we don't know.

[Bees Knees]

IRS Pub 501, page 10 under the heading "Death of spouse" says:

If you are a surviving spouse without gross
income and you remarry in the year your spouse
died, you can be claimed as an exemption on
both the final separate return of your deceased
spouse and the separate return of your new
spouse for that year. If you file a joint return with
your new spouse, you can be claimed as an
exemption only on that return.

The support for this is found in the relationship between IRC §151 and §152. Section 152 defines a dependent as either a qualifying child or a qualifying relative. Obviously, a spouse is not a qualifying child of the other spouse. That leaves a qualifying relative. Section 152(d)(2)(H) says a qualifying relative cannot be a spouse at any time during the year. That means a spouse can NEVER be treated as a dependent under Section 152.

Section 151(b) is the code section that allows an exemption deduction for the taxpayer and spouse. Neither spouse under Section 151 is treated as a dependent of the other. There are two ways listed under Section 151(b) that allows an exemption deduction for both spouses on a tax return:

(1) If they file a joint return with each other.

(2) If one files a separate return and the other has no gross income and is not the dependent of another taxpayer.

Code Section 151 is NOT the code section that defines a dependent. The spouse with no gross income is not treated as a dependent of the spouse with income. The taxpayer spouse with income is simply allowed an exemption deduction for his or her spouse, (1) either by filing a joint return with him or her, or (2) by filing a separate return and claiming his or her spouse IF he or she has no gross income and is not claimed under Section 152 as a dependent of someone else.

As to why you might file a separate return, maybe income is low enough where MFS does not put the income spouse into a higher tax bracket. That would then allow both the decedent spouse and the new spouse an exemption deduction for the no gross income spouse.

[KathMorgan]

Thanks!

BeesKnees, you are my hero! We don't actually have that situation but ran across it while helping a study group for the RTRP test. It had me stumped. It is just like a question the IRS would put on the test. Of course all the relevant returns would have to be mailed in as the EFile system would kick the second one back as already used. If I did run across the situation (and it's doubtful you ever would) I think I would do the explanation note with the other returns info on both returns and citing the reg, because the average IRS screener would probably be as bumfuzzled as we all were.

Thanks again for the cites!

Kathy