DOMA: Is It Time to Recalculate Your Marital Exclusion Amounts

IRS Now Permits Same-Sex Couples to Recalculate Marital Exclusion Amounts

 
Prior to 2013, under the Defense of Marriage Act (DOMA), same-sex couples were not treated equally and equitably in regards to income tax and estate tax. DOMA was just plain wrong! It was prejudicial and it created second-class citizens from an already growing marginalized community. Recalculating Marital Exclusion Amounts might help to level the playing field.
 
Following the reversal of “Section 3 “ of DOMA in 2013 (The United States v. Windsor)- the IRS recently issued an IRS Notice 2017–15 that provides procedures for same-sex married couples to recalculate the transfer-tax treatment for property transferred to spouses before the U.S. Supreme Court invalidated Section 3 of DOMA in United States v. Windsor (2013).
 
According to the notice, if the previously and unlawful application of DOMA prevented tax-favored transfers between and among qualified spouses, as it relates to both gift and estate taxes, the IRS will accept amendments and will provide refunds and other corrections to these previously filed returns. If the statute of limitations has expired, there are methods to still correct and adjust values via alternative methods.
 
The notice similarly provides relief for Generation-Skipping Transfer (GST) tax purposes by allowing taxpayers to recalculate their available GST exemption based on Windsor.
 
Once the Supreme Court overturned DOMA (2013) disallowing second-class citizenry, the federal constitutional protections for those legally married consistent with all citizens. Be aware that there is a statute of limitations (relative to claims to correct transfer and associated taxes), so please check with your financial advisor, or contact us for assistance. If the statutes are closed halting the refund process, you might be able to make an adjustment of the assignment of the residual estate values (gift and inheritance). Again, we are here to provide the best support for all persons as we believe that liberty, freedom and human rights should be equal and equitable. Accordingly, please contact us so we can help you determine your best path forward.
 

The Key Is…

If you are a same-sex couple, and your spouse has passed away, and you paid an estate tax when you shouldn’t have paid an estate tax, Contact Us Right Away; this should be fixed and corrected.

 

The Inside Scoop: Make a Note

As long as the limitation period for filing claims for credits or refunds has not expired, you may file to claim the marital deductions allowed. However, the IRS warns, once the assessment limitation period has expired, neither the value of the transferred interest nor any position concerning a legal issue related to the transfer can be changed per IRS Notice 2017-15. Similarly, no credit or refund of the tax paid on that marital gift can be given once the limitation period on claims for credits or refunds has expired.
 
If the limitation period has expired, the IRS Notice allows the taxpayer to recalculate the taxpayer’s remaining applicable exclusion amount as a result of recognizing the taxpayer’s marriage to the taxpayer’s spouse. The taxpayer must recalculate the taxpayer’s remaining applicable exclusion amount, in accordance with IRS forms and instructions.
 

What’s It All Worth?

If you are a same-sex couple, and your spouse has passed away, and you paid an estate tax when you shouldn’t have paid an estate tax, Contact Us Right Away; this should be fixed and corrected. Let’s see if you’re on track with your Marital Exclusion Amounts.

 

Daniel Morris, Managing Director, Chief Dragon SlayerCONTACT US… Morris+D’Angelo is the industry-leader for many High-Wealth Customers and Organizations.

707 SW Washington St., Suite 1100
Portland, Oregon, 97205

503.749.6300 – Portland Office
408.292.2892 – San Jose Office
 

For Your Information: Defense of Marriage Act (DOMA)

DOMA, which Congress enacted in 1996, defined marriage for federal law purposes as the legal union of one man and one woman. Under Section 3 of DOMA, same-sex marriage was not recognized for any federal purposes, including the filing of joint tax returns and the unlimited marital estate tax deduction. In Windsor, the Supreme Court held that Section 3 of DOMA was unconstitutional because it violated the Fifth Amendment’s Due Process Clause by denying equal protection to same-sex couples who are lawfully married in their states.

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