Rev. Rul. 76-140

Advice has been requested whether the provisions of section 1.6015(b)-1(b) of the Income Tax Regulations for allocating estimated income tax payments between spouses A and B apply under the circumstances described below.

The taxpayers A and B filed a joint Federal income tax return for 1974 in which they elected to have the overpayment shown on their return applied as a credit toward their estimated tax for 1975. They filed neither a joint declaration nor separate declarations of estimated tax for 1975. The taxpayers were divorced in 1975 and filed separate income tax returns for that year. A claimed the full amount of the 1974 overpayment as a credit on a separate 1975 income tax return. B did not claim any part of the 1974 overpayment on a separate 1975 income tax return. Subsequently B filed a timely refund claim based on applying half of the 1974 overpayment as a payment against the 1975 tax liability resulting in an overpayment for 1975. The refund claim was not accompanied by any evidence that the taxpayers had not filed their separate 1975 returns pursuant to an agreement as to the way their 1974 overpayment was to be applied as a 1975 tax payment.

Section 6402(b) of the Code authorizes the Secretary or the Secretary's delegate to provide by regulations for the crediting against the estimated income tax for any taxable year of the amount determined to be an overpayment of income tax for a preceding taxable year.

Section 301.6402-3(b)(2) of the Regulations on Procedure and Administration provides that if the taxpayer elects to have all or part of the overpayment shown on a return applied to the estimated income tax for a succeeding taxable year, such amount shall be applied as a payment on account of the estimated income tax for such year or the installments thereof.

Section 6315 of the Code provides that payment of the estimated income tax, or any installment thereof, shall be considered payment on account of the income taxes imposed for the taxable year.

Section 6015(a) of the Code requires the filing of declaration of estimated tax by individuals, except under certain circumstances. Section 6015(b) provides that if spouses make a joint declaration of estimated tax but do not make a joint return for the taxable year, the estimated tax for that year may be treated as the estimated tax of either spouse or it may be divided between them.

Section 1.6015(b)-1(b) of the Income Tax Regulations provides, in part, that if spouses made a joint declaration of estimated tax but do not file a joint return for that year, the payments made on account of the estimated tax for that year may be treated as payments on account of either spouse's liability, or may be divided between them in such manner as they may agree. If they fail to agree to a division, the estimated tax payments will be allocated according to the following rule. The portion of the estimated tax payments to be allocated to a spouse shall be that portion of the aggregate of all such payments as the amount of tax shown on the separate return of that spouse bears to the sum of the taxes shown on the separate returns of both spouses.

Although section 1.6015(b)-1(b) of the regulations lists the requirements for spouses that file joint declarations of estimated tax and then file separate income tax returns, it is also applicable when, as in this case, spouses make a joint election resulting in an estimated tax payment, and the parties are subsequently divorced.

The allocation rule of section 1.6015(b)-1(b) of the regulations only applies when the parties are unable to agree to a division of their estimated tax payments. If, in filing their separate returns, the parties had both claimed all or most of the estimated tax payments, the Internal Revenue Service would conclude that no agreement had been made, and would allocate the payments using the formula prescribed by section 1.6015(b)-1(b). However, when the parties file separate returns that divide the aggregate amount of the estimated tax payments between them, as in this case, this is evidence that the parties reached agreement on the allocation, and that the allocation rule of section 1.6015(b)-1(b) does not apply. If one of the divorced spouses subsequently claims a refund on the ground that a greater part of the estimated tax payment should have been credited against that spouse's tax liability, that party will have the burden of proving that the separate returns did not reflect an agreement between the former spouses.

Accordingly, since B's refund claim was not supported by any evidence that the parties had not filed their separate 1975 returns pursuant to an agreement as to the allocation of their estimated tax payment, the refund claim will be disallowed, and the Service will not reallocate the estimated tax payment under section 1.6015(b)-1(b) of the regulations.