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Author: RobbiePat One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Tax Strategy of MF Separately Date: 3/14/1999 3:15 PM
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Married filing separately looks like it can occasionally save taxes by keeping one spouse in a lower tax bracket. How much flexibility does a taxpayer have in assigning assets to himself or his spouse?

For example, since dividends are taxed at the bracket amount, it would make sense to assign all dividends to the lower paid spouse (lower tax bracket). On the other hand, long term capital gains get taxed at the more favorable 20%, so the spouse making more would not pay a penalty by owning these.

Now here's the tough question. With jointly owned mutual funds that pay both dividends and long term capital gains; how supportable is a couple's statement that the dividends are owned by the lower paid spouse, and the LTCG distributions are owned by the higher paid spouse?
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Author: JABoa Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12144 of 121219
Subject: Re: Tax Strategy of MF Separately Date: 3/14/1999 4:14 PM
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Beware, I am treading on thin ice here. As I understand it, you cannot allocate deductions and whatnot. Somebody's name is on each security or property, and that someone pays the taxes and gets the deductions.

Suppose, for example, I am in the 39.6% bracket (I'm not, more's the pity) and my new bride before we married was in the 15% bracket, and she had a mortgage and itemized. If we file as Married Filing Separately, it is SHE who will take the deduction and not me, because her name is on the mortgage note.

Perhaps others will correct me, but I think you're engaged in wishful thinking. Sorry.

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Author: DowDanny Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12145 of 121219
Subject: Re: Tax Strategy of MF Separately Date: 3/14/1999 4:35 PM
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As JABoa said, the dividends and cap gains are reported to "somebody's" Soc Sec number. That person, if filing separately, gets the income, even if the account is jointly owned with a partner.

It must be impossible to divide the "income" from the "cap gains", since it seems already impossible to allocate either to the spouse who hasn't provided the tax id number.

And what's wrong with joint returns, anyway ?

Simply,

- Danny

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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12292 of 121219
Subject: Re: Tax Strategy of MF Separately Date: 3/16/1999 1:13 AM
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[[ Married filing separately looks like it can occasionally save taxes by keeping one
spouse in a lower tax bracket. How much flexibility does a taxpayer have in
assigning assets to himself or his spouse?]]

it really depends on where you live. If you are in a separate property state, the rules are much different than if your are in a community property state.

I have a number of posts on the marriage penalty and the married-separate filing status in the Taxes FAQ area. You might want to check it out for additional information.

[[ For example, since dividends are taxed at the bracket amount, it would make
sense to assign all dividends to the lower paid spouse (lower tax bracket).]]

But you can't just "assign" them. They belong to somebody. Either you, or your spouse, or both of you. And again, depending upon where you live, you are required to make the proper reporting.

[[ On
the other hand, long term capital gains get taxed at the more favorable 20%, so
the spouse making more would not pay a penalty by owning these.]]

Again, you can't simply pick and chose who you want to give what on a separate return.

Again, I would suggest that you read my post on the married-separate issues in the Taxes FAQ area for some backround.

TMF Taxes
Roy

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