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Statute of limitations affects same-sex filing status

Although the Supreme Court decision ruled that the Defense of Marriage Act was unconstitutional and that same-sex spouses would be eligible for the same federal benefits as opposite-sex spouses, the confusion is not over. The Internal Revenue Service and the Treasury Department stated that same-sex spouses who were legally married in states that recognize gay marriage like New Jersey would be treated as married spouses for federal taxes, even if they live in states that do not legally recognize their marriage. Even though same-sex spouses can transfer property to their spouses without having to incur an estate tax, the Internal Revenue Service has set a limit for the years of refunds that can be amended.

The Supreme Court ruled this summer that preventing same-sex spouses from taking the marital deduction was unconstitutional. This deduction allows married individuals to transfer property to spouses during their lifetime or at death without having to pay tax on the transfer. The IRS stated that individuals who are affected by the decision can file amended returns for time before the historic Supreme Court decision. However, this relief is only for the last three years because the IRS limits amended returns to a three-year statute of limitations.

Practitioners believe that the IRS is not likely to open up the statute of limitations to allow for more amended returns. They also believe that the Supreme Court would say that the closing timeline is rational to avoid too many refunds. However, other proponents argue that the Supreme Court ruling is not likely to affect many same-sex spouses, making it possible to open up the time limit.

New Jersey estate planning lawyers may be able to explain how the recent decision may affect benefits for same-sex couples. They may also offer certain strategies to this demographic for estate planning purposes.

Source: Bloomberg, "Same-Sex Marriage Fight Looms Next on IRS Estate Refunds: Taxes", Diane Freda, October 15, 2013

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