Married Filing separately joint taxable brokerage account

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RXfiles
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Married Filing separately joint taxable brokerage account

Post by RXfiles »

how do you divide taxes between the two returns?
rkhusky
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Re: Married Filing separately joint taxable brokerage account

Post by rkhusky »

RXfiles wrote: Fri Jan 14, 2022 12:39 pm how do you divide taxes between the two returns?
50/50?
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RXfiles
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Re: Married Filing separately joint taxable brokerage account

Post by RXfiles »

rkhusky wrote: Fri Jan 14, 2022 1:06 pm
RXfiles wrote: Fri Jan 14, 2022 12:39 pm how do you divide taxes between the two returns?
50/50?
i know seems like a dumb question but i cant really find much on it. can we divide it how ever we want? if its more beneficial for one person to have 100% of the gains can you just file 100% on one and 0% on the other?
jebmke
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Re: Married Filing separately joint taxable brokerage account

Post by jebmke »

Publication 550
Joint accounts. If two or more persons hold property (such as a savings account, bond, or stock) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest or dividends from the property is determined by local law.
Community property states. If you are married and receive a distribution that is community income, half of the distribution generally is considered to be received by each spouse. If you file separate returns, you must each report one-half of any taxable distribution. See Pub. 555, Community Property, for more information on community income.

If the distribution is not considered community property and you and your spouse file separate returns, each of you must report your separate taxable distributions.

Example. You and your spouse have a joint money market account. Under state law, half the income from the account belongs to you, and half belongs to your spouse. If you file separate returns, you each report half the in-
When you discover that you are riding a dead horse, the best strategy is to dismount.
mlipps
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Re: Married Filing separately joint taxable brokerage account

Post by mlipps »

It mostly depends on your state of residence what restrictions you have on how to divvy it up. If you're in a community property state, you have to divide 50/50. Otherwise, it's up to you. Some more details & references in this post on Intuit: https://ttlc.intuit.com/community/taxes ... 00/1304462
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RXfiles
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Re: Married Filing separately joint taxable brokerage account

Post by RXfiles »

Thank you
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JazzTime
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Re: Married Filing separately joint taxable brokerage account

Post by JazzTime »

Bear in mind that the 1099 is only sent to the first account owner under his/her SSN. The IRS will be looking to match the 1099 to the tax return. So if you received the 1099, but intend to report some portion to the other joint owner, be sure to carefully go through the tax program to indicate the correct steps for reporting to the IRS that there is an exception or correction in the amount being reported on each return. I don't know exactly what those steps are without going through it myself.
AnEngineer
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Re: Married Filing separately joint taxable brokerage account

Post by AnEngineer »

I have found no guidance if you don't live in a community property state.
ralph124cf
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Re: Married Filing separately joint taxable brokerage account

Post by ralph124cf »

If you are going to continue filing married filing separately, I would strongly suggest splitting the accounts. They don't have to be split evenly, and I would suggest that the lower income spouse gets the bulk of the assets.

Ralph
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RXfiles
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Re: Married Filing separately joint taxable brokerage account

Post by RXfiles »

ralph124cf wrote: Fri Jan 14, 2022 6:16 pm If you are going to continue filing married filing separately, I would strongly suggest splitting the accounts. They don't have to be split evenly, and I would suggest that the lower income spouse gets the bulk of the assets.

Ralph
we live in non community property state. so that wouldn't make a difference for us would it?
MarkNYC
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Re: Married Filing separately joint taxable brokerage account

Post by MarkNYC »

I don't think spouses can split the income and gain/losses from a joint account any way they choose. Each spouse's share of income and gain is determined by state law governing ownership of property. For non-community property states, I believe the IRS will assume 50% ownership by each. If the spouses allocate other than 50/50 and are challenged by the IRS, the spouses' position should prevail in that dispute only if they can show that their allocation was done in accordance with their state law regarding ownership of funds in a joint account.
TropikThunder
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Re: Married Filing separately joint taxable brokerage account

Post by TropikThunder »

MarkNYC wrote: Fri Jan 14, 2022 7:32 pm I don't think spouses can split the income and gain/losses from a joint account any way they choose. Each spouse's share of income and gain is determined by state law governing ownership of property. For non-community property states, I believe the IRS will assume 50% ownership by each. If the spouses allocate other than 50/50 and are challenged by the IRS, the spouses' position should prevail in that dispute only if they can show that their allocation was done in accordance with their state law regarding ownership of funds in a joint account.
That would imply that changing the allocation back and forth is problematic, correct?
AnEngineer
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Re: Married Filing separately joint taxable brokerage account

Post by AnEngineer »

MarkNYC wrote: Fri Jan 14, 2022 7:32 pm I don't think spouses can split the income and gain/losses from a joint account any way they choose. Each spouse's share of income and gain is determined by state law governing ownership of property. For non-community property states, I believe the IRS will assume 50% ownership by each. If the spouses allocate other than 50/50 and are challenged by the IRS, the spouses' position should prevail in that dispute only if they can show that their allocation was done in accordance with their state law regarding ownership of funds in a joint account.
The issue is I don't think there's any federal guidance on this, that is there's no presumption of 50/50, and I doubt all states have laws on this as not all states have income tax.
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JazzTime
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Re: Married Filing separately joint taxable brokerage account

Post by JazzTime »

Also, bear in mind that if you file MFS, neither of you can contribute to Roth. The only way to contribute to Roth is via backdoor method. I know you didn't ask about this, but I figured I would give you a heads up. Most people don't know this.
secondcor521
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Re: Married Filing separately joint taxable brokerage account

Post by secondcor521 »

There is a list of disadvantages to MFS status in Pub 17.
MarkNYC
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Re: Married Filing separately joint taxable brokerage account

Post by MarkNYC »

AnEngineer wrote: Fri Jan 14, 2022 10:22 pm
MarkNYC wrote: Fri Jan 14, 2022 7:32 pm I don't think spouses can split the income and gain/losses from a joint account any way they choose. Each spouse's share of income and gain is determined by state law governing ownership of property. For non-community property states, I believe the IRS will assume 50% ownership by each. If the spouses allocate other than 50/50 and are challenged by the IRS, the spouses' position should prevail in that dispute only if they can show that their allocation was done in accordance with their state law regarding ownership of funds in a joint account.
The issue is I don't think there's any federal guidance on this, that is there's no presumption of 50/50, and I doubt all states have laws on this as not all states have income tax.
The IRS general policy is to presume/accept a 50/50 allocation. I don't know the legal basis for this policy. (As an aside, when one spouse dies 50% of the amount in a joint spousal account will automatically be included in the federal gross estate of the decedent)

The presence or absence of a state income tax is not relevant. The issue involves state laws pertaining to joint ownership of property. See my bolded statement above, which is stated in IRS publication 504.
AnEngineer
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Re: Married Filing separately joint taxable brokerage account

Post by AnEngineer »

MarkNYC wrote: Sat Jan 15, 2022 10:22 am
AnEngineer wrote: Fri Jan 14, 2022 10:22 pm
MarkNYC wrote: Fri Jan 14, 2022 7:32 pm I don't think spouses can split the income and gain/losses from a joint account any way they choose. Each spouse's share of income and gain is determined by state law governing ownership of property. For non-community property states, I believe the IRS will assume 50% ownership by each. If the spouses allocate other than 50/50 and are challenged by the IRS, the spouses' position should prevail in that dispute only if they can show that their allocation was done in accordance with their state law regarding ownership of funds in a joint account.
The issue is I don't think there's any federal guidance on this, that is there's no presumption of 50/50, and I doubt all states have laws on this as not all states have income tax.
The IRS general policy is to presume/accept a 50/50 allocation. I don't know the legal basis for this policy. (As an aside, when one spouse dies 50% of the amount in a joint spousal account will automatically be included in the federal gross estate of the decedent)

The presence or absence of a state income tax is not relevant. The issue involves state laws pertaining to joint ownership of property. See my bolded statement above, which is stated in IRS publication 504.
Where is the IRS general policy? I couldn't find it when looking before, only discussion of community property states, which is used to split e.g. wage income from one spouse evenly between the two because the wages are community property.
MarkNYC
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Re: Married Filing separately joint taxable brokerage account

Post by MarkNYC »

AnEngineer wrote: Sat Jan 15, 2022 10:29 am
MarkNYC wrote: Sat Jan 15, 2022 10:22 am
AnEngineer wrote: Fri Jan 14, 2022 10:22 pm
MarkNYC wrote: Fri Jan 14, 2022 7:32 pm I don't think spouses can split the income and gain/losses from a joint account any way they choose. Each spouse's share of income and gain is determined by state law governing ownership of property. For non-community property states, I believe the IRS will assume 50% ownership by each. If the spouses allocate other than 50/50 and are challenged by the IRS, the spouses' position should prevail in that dispute only if they can show that their allocation was done in accordance with their state law regarding ownership of funds in a joint account.
The issue is I don't think there's any federal guidance on this, that is there's no presumption of 50/50, and I doubt all states have laws on this as not all states have income tax.
The IRS general policy is to presume/accept a 50/50 allocation. I don't know the legal basis for this policy. (As an aside, when one spouse dies 50% of the amount in a joint spousal account will automatically be included in the federal gross estate of the decedent)

The presence or absence of a state income tax is not relevant. The issue involves state laws pertaining to joint ownership of property. See my bolded statement above, which is stated in IRS publication 504.
Where is the IRS general policy? I couldn't find it when looking before, ...
I haven't seen their policy in writing, only in their practice.

Edit: there is some relevant language in IRS pub 551, regarding "Qualified Joint Interests" which is property owned jointly by spouses. It states (paraphrasing) that 50% of the value of the account will be considered as owned by each spouse, regardless of how much each spouse contributed to the account.
AnEngineer
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Re: Married Filing separately joint taxable brokerage account

Post by AnEngineer »

MarkNYC wrote: Sat Jan 15, 2022 10:36 am
AnEngineer wrote: Sat Jan 15, 2022 10:29 am
MarkNYC wrote: Sat Jan 15, 2022 10:22 am
AnEngineer wrote: Fri Jan 14, 2022 10:22 pm
MarkNYC wrote: Fri Jan 14, 2022 7:32 pm I don't think spouses can split the income and gain/losses from a joint account any way they choose. Each spouse's share of income and gain is determined by state law governing ownership of property. For non-community property states, I believe the IRS will assume 50% ownership by each. If the spouses allocate other than 50/50 and are challenged by the IRS, the spouses' position should prevail in that dispute only if they can show that their allocation was done in accordance with their state law regarding ownership of funds in a joint account.
The issue is I don't think there's any federal guidance on this, that is there's no presumption of 50/50, and I doubt all states have laws on this as not all states have income tax.
The IRS general policy is to presume/accept a 50/50 allocation. I don't know the legal basis for this policy. (As an aside, when one spouse dies 50% of the amount in a joint spousal account will automatically be included in the federal gross estate of the decedent)

The presence or absence of a state income tax is not relevant. The issue involves state laws pertaining to joint ownership of property. See my bolded statement above, which is stated in IRS publication 504.
Where is the IRS general policy? I couldn't find it when looking before, ...
I haven't seen their policy in writing, only in their practice.

Edit: there is some relevant language in IRS pub 551, regarding "Qualified Joint Interests" which is property owned jointly by spouses. It states (paraphrasing) that 50% of the value of the account will be considered as owned by each spouse, regardless of how much each spouse contributed to the account.
That's about when one spouse dies, but I can see it as an indication of general policy, given the lack of any other guidance. Thanks.
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