Attorney-at-Law

THE HIDDEN SPOUSE TRICK

In Uncategorized on 07/29/2016 at 15:49

It’s an old baseball trick that was, or should have been, pensioned off long ago. The pick-off throw is late. The runner holds the base. The infielder pretends to throw the ball back to the pitcher, but holds it for a second as the runner steps off the base. Whereupon the sneaky infielder tags the runner and yells for the umpire to declare the runner out. Of course, the correct counter is for the runner to watch the pitcher actually receive the ball before making any move off the base.

Well, IRS is wise to the hidden spouse trick, wherein one spouse pays the whole mortgage interest for the year at issue, files MFS and tries for more than the $500K that Section 163(h)(3)(B)(ii) allows.

Tony Tao-Fu Hsu, Docket No. 30921-15S, filed 7/29/16, tries it on. And is tagged out in a designated hitter from The Judge With the Wonderful Name, STJ Lewis Carluzzo.

Tony Tao-Fu evidently didn’t read my blogpost “Faina, Meet Sophy,” 5/17/12, or he would have known this was a loser.

STJ Lew: “As noted, according to petitioner, the ‘obvious purpose’ and ‘spirit of the law’ is to prevent married taxpayers who file separately from each using an indebtedness limitation of $1,100,000. We see the purpose of the statutory limitations quite differently.” Order, at p. 4.

Going back to ol’ Faina Bronstein, 138 T.C. 21, cited in my blogpost aforesaid, “We believe section 163(h)(3)(B)(ii) clearly states that a married individual filing a separate return is limited to a deduction for interest paid on $500,000 of home acquisition indebtedness.” Order, at p. 4.

It doesn’t matter than Mrs. Tony Tao-Fu (name omitted in order) was never in title; never signed note, deed of trust or anything else; and had no legal obligation to lender, Tony Tao-Fu or anybody else. Or that Tony Tao-Fu paid every centavo of the mortgage interest for the year at issue. Or that the mortgage well exceeded $1 million.

“Obvious purpose” and “spirit of the law” don’t get it when Congress hasn’t spoken unequivocally.

 

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  1. […] Taishoff, THE HIDDEN SPOUSE TRICK. “Well, IRS is wise to the hidden spouse trick, wherein one spouse pays the whole mortgage […]

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