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Federal tax ruling impacts estate planning for same-sex married couples

The U.S. Department of the Treasury and the Internal Revenue Service recently issued new tax rulings providing that same-sex couples who are legally married in jurisdictions that recognize same-sex marriages will be recognized as legally married for federal tax purposes. This tax treatment applies even if the couple currently lives in a jurisdiction that does not recognize same-sex marriages, thus impacting estate planning for same-sex married couples nationwide. According to the Washington Post, as of October 22, 2013, a total of 14 states, plus the District of Columbia, allow same-sex marriage, and 35 states have limitations on it.
 
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    January 10, 2014 /24-7PressRelease/ -- Federal tax ruling impacts estate planning for same-sex married couples

Article provided by Shams Law Firm, P.A.
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The U.S. Department of the Treasury and the Internal Revenue Service recently issued new tax rulings providing that same-sex couples who are legally married in jurisdictions that recognize same-sex marriages will be recognized as legally married for federal tax purposes. This tax treatment applies even if the couple currently lives in a jurisdiction that does not recognize same-sex marriages, thus impacting estate planning for same-sex married couples nationwide. According to the Washington Post, as of October 22, 2013, a total of 14 states, plus the District of Columbia, allow same-sex marriage, and 35 states have limitations on it.

The ruling implements the U.S. Supreme Court's landmark decision in United States v. Windsor. The Windsor decision, issued on June 26, 2013, invalidated a key provision of the 1996 Defense of Marriage Act, a federal definition of marriage as between one man and one woman.

In a recent press release, Treasury Secretary Jacob L. Lew stated that, "[t]oday's ruling provides certainty and clear, coherent tax filing guidance for all legally married same-sex couples nationwide. It provides access to benefits, responsibilities and protections under federal tax law that all Americans deserve. This ruling also assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change."

Federal tax provisions affected by the ruling

The ruling provides that same sex couples will be treated as married for "all federal tax purposes, including income and gift and estate taxes" and applies to all federal tax provisions where marriage is a factor, including:
-Filing status
-Claiming personal and dependency exemptions
-Taking the standard deduction
-Employee benefits
-Contributing to an IRA
-Claiming the earned income tax credit or child tax credit


Same-sexmarriages covered

Same-sex couples are covered by the ruling if the marriage was legally entered into in one of the 50 states, the District of Columbia, a U.S. territory, or a foreign country.

Domestic partnerships, civil unions, and the like

The ruling does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law.

Refund claims

Although the effective date of the ruling is September 16, 2013, individuals who were in same-sex marriages may, but are not required to, file amended returns changing the taxpayer's marital status for any prior tax years that are still open under the statute of limitations (generally the later of three years from the date the return was filed or two years from the date the tax was paid).

Same-sex married taxpayers would likely find it advantageous to file amended returns for federal gift taxes and federal estate taxes because of the unlimited marital deduction, a provision that allows spouses to transfer an unrestricted amount of assets between themselves at any time, whether during their lifetimes time or at the death of the transferor, without incurring federal estate or gift tax liability.

Prior income tax returns that are still open under the statute of limitations should also be carefully re-examined.

To process a refund claim the taxpayer should file IRS Form 843, Claim for Refund and Request for Abatement (gift or estate taxes) or IRS Form 1040X, Amended U.S. Individual Income Tax Return (income taxes).

Estate planning can be a complex process and tax laws are subject to frequent changes. Individuals desiring assistance in these matters should consult with an experienced estate planning attorney or other tax professional who stays current in this field in order to ensure that it is done correctly.



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