Nadine Vichich v. Comm., 146 TC No. 12
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Widow Can’t Use Deceased Husband’s AMT Credits (Nadine Vichich v. Comm., 146 TC No. 12)
Before his marriage to Nadine Vichich, William Vichich exercised incentive stock options that resulted in AMT liability, which he reported on a 1998 tax return filed jointly with his first wife, Marla. Payment of the AMT liability in 1998 generated an AMT credit carryforward of $304,442. Ms. Vichich was married to Mr. Vichich from 2002 until his death in 2004. On her 2009 tax return, Ms. Vichich reported an AMT credit of $151,928 derived from her deceased husband’s 1998 AMT credit carryforward that she used to offset her individual income tax liability. The court agreed with the IRS that Ms. Vichich was not entitled to any premarital credit carryforwards.
Tax practitioner planning. Whether there is a death or a divorce, the marriage ceases to exist, and tax attributes reported on a joint return for an earlier year must be properly allocated for subsequent years to the divorced spouses or to the surviving spouse, as applicable.
Also see.
Calvin v. United States, 354 F.2d 202 (10th Cir. 1965), where the taxpayers attempted to use net operating losses that originated with the taxpayer wife before their marriage to offset the taxpayer husband’s income earned in their first year of marriage. Relying on §6013(d) and §1.172-7, the Court of Appeals for the 10th Circuit concluded that, for losses occurring before marriage, “the net operating loss provisions are personal to the taxpayer who incurred such loss and only available in other years to offset income of the same taxpayer.”
Zeeman v. United States, 395 F.2d 861 (2d Cir. 1968), where the Court of Appeals for the 2nd Circuit relied on the reasoning in Calvin to deny a loss carryback to the taxpayer in the “reverse situation” who sustained losses after her husband’s death and then sought to carry them back to joint returns in which all of the reported income belonged to her husband. The court in Zeeman noted succinctly that “[t]he merger of * * * [married couples’] income for tax purposes is linked between different years for only so long as they are married.”