AMT and Equity Compensation
Alternative minimum tax, nonqualified stock options, incentive stock options and other forms of equity compensation.
Form 8801 when filing status changes
Posted by: esetter, March 16, 2016 04:27PM
In 2014, my son and daughter-in-law filed a joint return and paid AMT taxes. In 2015, their filing status will be married filing separately (one had large medical expenses).

When completing each of their 2015 Form 8801's, should I allocate their joint 2014 Form 6251 information? If so, is a 50/50 allocation appropriate or should some other allocation method be used?

Re: Form 8801 when filing status changes
Posted by: Kaye Thomas, March 17, 2016 06:56PM
The IRS has steadfastly refused to answer questions about how to fill out Form 8801 when filing status changes. I've never heard of anyone getting in trouble over this issue, though, so if you take a reasonable approach you should be okay. I'd say 50/50 would probably be considered reasonable, but if there's an ISO adjustment it could also be reasonable to allocate all that adjustment to the spouse who exercised the options. Note that you'll have another problem next year if they go back to filing jointly, because the 8801 assumes you're getting information from a single prior year tax return.

Kaye Thomas
Fairmark.com

Re: Form 8801 when filing status changes
Posted by: esetter, March 17, 2016 07:20PM
Thanks for your prompt and thoughtful response. Assuming I allocate the 2014 data, I'm still left with lines 5, 6, 11 and 14 on the 2015 Form 8801. Do I enter enter the amounts for 2014 MFJ (which they did file) or MFS?

Depending on the amount of this year's medical expenses, they may file jointly for tax year 2016.

Re: Form 8801 when filing status changes
Posted by: Kaye Thomas, March 17, 2016 07:46PM
Where the form asks for the number from the previous year's return, I would do an allocation rather than reporting the full number on both spouses' returns because you can get some screwy results otherwise. Somewhere the IRS has issued guidance on how to split tax items between spouses but working through those kinds of details would be a big ask. Do something you would be able to explain to the IRS with a straight face in the unlikely event they ever question it. As long as you aren't manipulating the numbers for an unfair advantage you'll be fine. IRS agents don't have any guidance on how to do this, either.

Kaye Thomas
Fairmark.com

Re: Form 8801 when filing status changes
Posted by: esetter, March 17, 2016 07:49PM
Thanks again.



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