IRS notice permits recalculation of marital deductions for same-sex couples.

• Author: Schreiber, Sally P.

In Notice 2017-15, the IRS provided the procedures same-sex married couples should use to recalculate the transfer-tax treatment for property transferred to spouses before the U.S. Supreme Court invalidated Section 3 of the Defense of Marriage Act (DOMA) in Windsor, 133 S. Ct. 2675 (2013).

DOMA, which Congress enacted in 1996, defined marriage for federal law purposes as the legal union of one man and one woman. Under Section 3 of DOMA, same-sex marriage was not recognized for any federal purposes, including the filing of joint tax returns and the unlimited marital estate tax deduction. In Windsor, the Supreme Court held that Section 3 of DOMA was unconstitutional because it violated the Fifth Amendment's Due Process Clause by denying equal protection to same-sex couples who are lawfully married in their states.

According to the notice, to the extent that the applicable exclusion amount from estate or gift tax was applied to a transfer between spouses that did not qualify for the marital deduction for federal estate or gift tax purposes at the time of the transfer solely because of DOMA, taxpayers will be permitted to establish that the transfer qualified for the marital deduction and recover the applicable exclusion amount previously applied on a return because of the transfer, even if the statute of limitation for that return under Sec. 6501 or 6511 has expired. However, if qualifying for the marital deduction or a reverse qualified terminable interest property (QTIP) election would require a QTIP, qualified domestic trust (QDOT), or reverse QTIP election, those taxpayers will have to request relief under Regs. Sec. 301.9100-3 to make the election.

As long as the limitation period for filing claims for credits or refunds under Sec. 6511 has not expired, a taxpayer may file an amended Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, or a supplemental Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, to claim the marital deduction for a gift or bequest to the taxpayer's same-sex spouse and to restore the applicable exclusion amount allocated to that transfer. However, the IRS warns, once the assessment limitation period has expired, neither the value of the transferred interest nor any position concerning a legal issue (other than the existence of the marriage) related to the transfer can be changed pursuant to Notice 2017-15. Similarly, no credit or refund of the tax paid on that...