Rev. Rul. 67-431

Advice has been requested as to how the amount of the refund based upon an investment credit carryback is to be determined under the circumstances described below, and whether the refund check should be made out to the taxpayer alone or to the taxpayer and his former wife.

The husband and wife filed a joint return of income for 1962. They were divorced in 1963. The husband was remarried in 1964 and filed a joint income tax return with his second wife for 1964. An investment credit for 1964 was based upon investments made by the husband after his divorce but before his remarriage. The credit was large enough to eliminate the entire tax for 1964 and to provide a balance for carryback to 1962 in accordance with section 46(b) of the Internal Revenue Code of 1954.

Revenue Ruling 60-216, C.B. 1960-1, 126, deals with the situation in which a husband and wife were divorced and the husband was remarried in a later year. A joint return was filed by the husband and his second wife which disclosed a net operating loss. That Revenue Ruling held that only the portion of the joint net operating loss which vested in the husband could be carried back and applied against income reported on a joint return filed by the husband and his first wife. It was further held that this carryback could be applied only against that portion of the income reported on the first joint return which vested in the husband. While Revenue Ruling 60-216 was limited to taxpayers residing in community property states, its applicability was extended by Revenue Ruling 65-140, C.B. 1965-1, 127, to taxpayers residing in noncommunity property states, and also to cases where the first marriage was terminated by death of one of the spouses rather than by divorce.

In the present case, as in Revenue Ruling 60-216, the marriage of spouses who filed a joint return was later terminated, the husband remarried, and a tax event pertaining to the husband occurred in a later year for which he filed a joint return with his second wife. The joint return filed with his second wife gave rise to a refund of taxes paid under the earlier joint return which he had filed with his first wife. Accordingly, the method set forth in Revenue Ruling 60-216 for determining the amount of the refund is applicable to the present case, and the investment credit attributable to investments made only by the husband may be carried back only to that portion of the tax shown on the joint return for 1962 which is attributable to him, in the same manner that a net operating loss carryback was computed and applied in Revenue Ruling 60-216.

Since a refund will be made with respect to the 1962 joint return only of taxes attributable to the husband, and since the Internal Revenue Service has no knowledge of circumstances indicating that those taxes were paid by anyone other than the husband, the refund check in this case will be made out to the husband alone.