The IRS has released Revenue Ruling 2013-17 setting forth its positions
on various tax issues as a result of the Supreme Court’s ruling in
United States v. Windsor that Section 3 of the Defense of Marriage Act
is unconstitutional as it violates the equal protection principles of
the fifth amendment. The IRS does not expressly address the impact on
Under DOMA the IRS had concluded that because of Section 3 of DOMA, the
two individuals comprising a same-sex marriage could not be considered
to be married for federal tax purposes as
Section of 3 of DOMA defined marriage to mean only a legal union between
one man and one woman as husband and wife, and the word spouse refers
only to person of the opposite sex who is a husband or a wife.
This article focuses on administering IRAs after Windsor.
Under the U.S. tax laws there are “tax bonuses” and “tax penalties” for
individuals who are married.
The first marriage tax bonus associated with IRAs is the spousal
contribution rule. The spouse with the lesser compensation is allowed to
use the other spouse’s income to make a larger contribution for himself
or herself than if he or she was not married. Example, John and Mark are
married. John is age 48 and Mark is age 44. For 2013 John has
compensation of $55,000 and Mark has compensation of $2,600 and dividend
and interest income of $40,000. Since they are married under federal
income tax law, Mark is able to make a $5,500 IRA for himself using
John’s excess compensation.
It does not appear that Mark will be able to make a contribution in 2013
for 2010, 2011 or 2012 based on the argument he would have made a
contribution had he known he could. Had Mark made contributions based on
John's compensation and such contributions had been considered to be
excess contributions, such contributions would now be considered to
qualifying spousal contributions.
The second marriage tax bonus associated with IRAs is that a spouse
beneficiary who is the sole beneficiary has the right to treat the
deceased spouse’s IRA as his or her own IRA. Any spouse beneficiary has
the right to a take a distribution from the deceased spouse’s IRA and
then rollover such distribution to the extent that no required
distribution is rolled over. The same-sex surviving
spouse will now have such rights to treat as own or to make a rollover
What policies and procedures will the IRS be applying with respect to
The IRS will still be applying the general rule that whether one is
married or not is determined by state law. The IRS will also be applying
the following rules.
First, for federal tax purpose, the terms “spouse,” “husband and wife,”
“husband,” and “wife” include an individual married to a person of the
same sex if the individuals are lawfully married under state law, and
the term “marriage” includes such marriage between individuals of the
same sex. That is, a state must have revised its marriage laws to
include same-sex marriages.
Secondly, for federal tax purpose, the IRS adopts a rule that as long as
the same-sex couple has been married in a state authorizing same-sex
marriages that they are not required to live or be domiciled in a state
which has authorized or recognizes same-sex marriages.
Thirdly, the IRS makes the rule that the terms “spouse,” “husband and
wife,” “husband,” and “wife” do not include individuals (whether the
same sex or the opposite sex) who have entered into a registered
domestic partnership, civil union, or other similar formal relationship
recognized under state law, but which is not “marriage” under such state
The same-sex couple has the discretion to file original or amended
returns to reflect being married for a prior tax year if such tax year
is still open. The couple is not required to file or amend their tax
return for a prior year claiming a married status. If they wish to
change their filing status they may do so only if a prior tax year is
still open under th statute of limitations. Tax years 2010, 2011 and
2012 are still open. Generally, the deadline for filing a refund claim
is three years from the date the return was filed or two years from the
date the tax was paid, whichever is later.
Most likely the transaction to lead a same-sex surviving spouse to file
an amended tax return will be when he or she will choose to treat the
inherited IRA of a deceased spouse as his or her IRA. In this situation
the same-sex surviving spouse might have been required to take an RMD as
he or she did not qualify as a spouse at the time. Such distributions
may certainly be stopped on a prospective basis. As to past
distributions, the IRS may be receptive to a request to waive the 60 day
rollover rule. That is, the IRS might authorize the same sex spouse to
rollover such distribution amounts.
Categories: Pension Alerts, Traditional IRAs