Taxpayers Husband Wife want to file MFS for 2023. They have Investments from a brokerage which are in their joint names. How does the income loss get split. Can one spouse claim a 100%. Additionally for rental income that they rent out for property that is jointly owned. Can one spouse claim all the rental income or loss.
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No, it is not allowed to assign one taxpayer's income/loss to another. Just like parents can't put their income on their kids' returns. And of course, if in a community property state then any community income must be split.
As the IRS states, "You will generally pay more combined tax on separate returns than you would on a joint return for the reasons listed under Special Rules, later [Pub 17]."
So what is their actual goal? Is one spouse concerned the other won't pay their tax liability? Is there concern about keeping secrets from each other (doesn't seem likely, since they share investments and rental property)? Unless you are in some state like Ohio where I've heard the state tax savings from filing MFS typically outweigh the fed tax increase, I can't think of any likely good reasons. Plus, of course, the double expense of two sets of tax returns instead of one.
And if you are the preparer, you most likely have a potential conflict of interest situation if you intend to prepare both returns. Even if only one spouse is your client, you can't ignore the implications of information you have already been provided regarding jointly owned income."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard -
There can be some interesting splits, but probably not what you're thinking. If ownership is not joint on everything, then whichever spouse controls should claim income/loss. For example, if one spouse owns the rental property outright, and the other does not, that spouse must claim the rental loss. If there is a capital loss carryforward attributable to only one spouse, then that spouse is entitled to that loss.
Joint ownership of brokerage must be split, unless some of the stocks were owned by one spouse prior to marriage.Comment
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The brokerage statement has both names but the primary holder is the husband and the 1099 is issued under the husband. So the 1099 should not be an issue if the husband reports the income lossComment
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What's important - is when were the securities in the account purchased? Before the joint account was established, or afterwards?
You seem to be missing the real issues. Form 1099s are issued in the primary (first) named owner. They are not issued in joint
Social Security numbers.Uncle Sam, CPA, EA. ARA, NTPI FellowComment
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The securities were bought and sold when the brokerage account was jointly ownedComment
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