Rev. Rul. 75-368

Advice has been requested concerning the validity of claims for credit or refund due to the carryback and carryforward of a net operating loss provided by section 172 of the Internal Revenue Code of 1954 under the circumstances described below.

The taxpayer and his first wife were divorced in 1969. Prior to the divorce, they had always filed joint income tax returns. In 1970, the taxpayer filed a return as an unmarried individual. During that year, the taxpayer sustained a net operating loss. In 1971, the taxpayer remarried and filed a joint tax return with his second wife. In 1973, taxpayer filed claims for refund of taxes paid in 1967, 1968 and 1971.

The questions presented are (1) whether the claims for refund of taxes paid in 1967, 1968 and 1971, due to the carryback and carryforward of the 1970 net operating loss, will be valid if signed only by the taxpayer without the signature of either his first wife, as related to 1967 and 1968, or his second wife, as related to 1971, and (2) whether, if there is a refund, the check should be made out to the taxpayer only.

Section 6013 of the Code provides that a husband and wife may make a single return jointly.

Section 6402 of the Code gives the Secretary or his delegate authority to credit the amount of any overpayment against the tax liability of the person who made the overpayment, and requires a refund of the balance to such person.

Rev. Rul. 60-216, 1960-1 C.B. 126, amplified by Rev. Rul. 65-140, 1965-1 C.B. 127, 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 second wife which disclosed a net operating loss. The Revenue Ruling holds 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 further holds that this carryback could be applied only against that portion of the income, reported on the joint return with his first wife, which vested in the husband.

In Calvin v. United States, 354 F. 2d 202 (10th Cir. 1965), the court held that a net operating loss carryover sustained by a taxpayer prior to her marriage is limited on a joint return to the amount of her own income reported on the joint return. Such carryover may not offset any income of her husband. The court determined there was nothing in the language of section 6013(d) of the Code which permits transactions occurring in the years prior to marriage to affect joint income taxes.

In the instant case, the net operating loss occurred in 1970, when the taxpayer filed his return as an unmarried individual. The net operating loss deduction for 1967, 1968 and 1971 will be carried back and carried over only to taxpayer's portion of the income shown on his joint returns. The joint tax rates will be applied to the reduced taxable income. The amount of taxpayer's overpayment on each return will be the excess of tax paid on each return over the recomputed tax for that return, limited to the amount of tax actually paid by the taxpayer that is attributable to his portion of the taxable income originally reported on the return.

Accordingly, the overpayments resulting from his net operating loss belong to taxpayer and his claims for credit or refund of taxes paid for 1967, 1968 and 1971 are valid with his signature only. If any refund is allowed, the check should be made payable to the taxpayer only.