Filing Status MUST be agreed on!

May 1, 2017

Mrs. Moss filed a 2008 return as married filing separately on which she claimed a loss due to the Bernard Madoff fraud scheme, although she had no investments affected by the fraud. Peter Moss believed his wife was delusional, and although she had been hospitalized for mental illness in 2005 and 2006 and had been released from the hospital in 2006 under the condition that she live with him, he was not her conservator or guardian. In 2013, a Connecticut probate court appointed her daughters as conservators.

The IRS changed the filing status of Peter Moss's return to married filing separately and issued him a notice of deficiency. He petitioned the Tax Court to challenge the IRS's determination, asking the court to invalidate his wife's return and accept his joint return.

Issues: Generally, a joint return must be signed by both spouses. However, a joint return may be signed by only one spouse where the signing taxpayer acts as an authorized agent for the spouse or where there is sufficient evidence that the nonsigning spouse consented to filing jointly.

Sec. 6012(b)(2) provides that if a person is unable to make a return, a duly authorized agent, among others, may make a return on his or her behalf. Regs. Sec. 1.6012-1(a)(5) provides that a person may be unable to file due to disease or illness and sets forth filing provisions, which must be complied with by the agent even when representing a disabled spouse. Under these provisions, the return must be accompanied by either (1) Form 2848, Power of Attorney and Declaration of Representative, or other power of attorney authorizing the agent to represent the person in making, executing, or filing the return; (2) a signed statement containing specified information and confirming that the incapacitated spouse consents to the signing of the return; or (3) a request by the taxpayer for a determination by the IRS that good cause exists for permitting the agent to submit the return.

Peter Moss contended that his wife was unable to file a return due to her mental illness and that the Tax Court should accept the original return he filed showing married-filing-jointly status.

Holding: The Tax Court held that Peter Moss was not entitled to married-filing-jointly status, as he failed to show that his wife was unable to file a return. It found that her hospital commitments for mental illness, his assertion of her mental illness, and the conservatorship order issued in 2013 did not establish that Mrs. Moss was incapable of filing her own 2008 return.

The court further found that even if it concluded that Mrs. Moss was unable to file a return, Peter Moss was not her agent, as he had no power of attorney or Form 2848 to attach to the return and did not file a statement confirming that Mrs. Moss consented to the signing of the return. The court ruled that although the couple had a long history of filing jointly, the evidence showed that she intended not to file a 2008 joint return.

Since Peter Moss had to file married filing separately, he could not claim an exemption for his wife. The court did allow him to apply the full overpayment of tax from the couple's 2007 joint return to his return.

Thanks to Mark Aquillo, CPA for pulling this info together.