Rev. Rul. 69-95

Advice has been requested whether a husband and wife are precluded from electing on a joint return the use of the income averaging method in computing their tax even though they furnished less than one-half of their support during their base period years, but each spouse met one of the exceptions to the support requirement, as specified in section 1303(c)(2) of the Internal Revenue Code of 1954.

The husband did not furnish one-half or more of his support in the base period years, but in the computation year not more than 25 percent of his and his wife's aggregate adjusted gross income was attributable to him. The wife also did not furnish one-half or more of her support during the base period years; however, in the computation year she was over 25 years old and she had not been a full-time student during at least 4 of her taxable years after she attained age 21 and before the computation year.

Section 1301 of the Code limits the use of the income averaging method to eligible individuals. Section 1303(c)(1) of the Code provides that an individual is not an eligible individual for the computation year if, for any base period year, such individual (and his spouse) furnished less than one-half of his support.

Section 1302(e)(1) of the Code defines the term "computation year" to mean the taxable year for which the taxpayer chooses the benefits of income averaging. In section 1302(e)(3) of the Code, a "base period year" is defined as any of the four taxable years immediately preceding the computation year. The term "adjusted taxable income" is defined in section 1302(b) of the Code to mean taxable income for the computation year decreased by certain specified amounts.

Section 1.1303-1(a) of the Income Tax Regulations provides that if a husband and wife make a joint return under section 6013 of the Code for the computation year, both the husband and wife must be eligible individuals in order to choose the benefits of income averaging.

Section 1303(c)(2) of the Code provides that the requirement that an individual, to be an eligible individual, must, with his spouse, have furnished 50 percent or more of his support durin each of his four base period years, does not apply if: (1) the computation year ends after the individual attained age 25 and, during at least four of his taxable years beginning after he attained age 21 and ending with his computation year, he was not a full-time student; (2) more than one-half of the individual's adjusted taxable income for the computation year is attributable to work performed by him in substantial part during two or more of the base period years; or (3) the individual makes a joint return for the computation year and not more than 25 percent of the aggregate adjusted gross income of such individual and his spouse for the computation year is attributable to such individual.

Accordingly, provided they otherwise qualify for the benefits of income averaging, the taxpayers in the instant case may elect on a joint return to use the income averaging method in computing their tax even though they furnished less than one-half of their support during the base period years.