Head-of-household return may be amended to married filing jointly after a petition to Tax Court

In a 2—1 decision reversing and remanding a Tax Court opinion (Ibrahim, T.C. Memo. 2014-8), the Eighth Circuit held that the term “separate return” as used in Sec. 6013(b) does not include a head-of-household return. Because a head-of-household return is not such a separate return, a taxpayer’s filing status may be amended from head of household to married filing jointly after a notice of deficiency is issued and a petition is filed with the Tax Court, the Eighth Circuit held.

Facts: The taxpayer, Isaak Abdi Ibrahim, and his wife, both immigrants from Somalia with limited English skills, had their 2011 tax return completed by a paid preparer. Ibrahim mistakenly claimed head-of-household status, for which he was not eligible, as he was married and lived with his wife during 2011.

Later, the IRS issued a notice of deficiency for the return. In his petition to the Tax Court, Ibrahim sought to change his filing status to married filing jointly to receive a credit and refund.

Issue: Sec. 6013(b)(1) allows an individual who filed a separate return for a tax year in which he or she could have filed a joint return with a spouse to elect to file a joint amended return within three years from the last date for filing such return (without regard to extensions). Elections, payments, credits, refunds, and other items from the separate return of either spouse are taken into account on the joint return. However, Sec. 6013(b)(2)(B) prohibits this election if either spouse is issued a notice of deficiency and subsequently files a petition with the Tax Court. The issue in this case was whether the term “separate return” as used in Sec. 6013(b)(1) includes head-of-household filing status. If so, since he had filed a Tax Court petition after receiving a notice of deficiency, Ibrahim could not amend his status to married filing jointly. Otherwise, the prohibition in Sec. 6013(b)(2)(B) would not apply and Ibrahim could make the election for a joint return.

The court noted that Sec. 6013(b)(1) does not define the term “separate return.” The IRS argued that it means any return other than a joint return. Ibrahim, citing Glaze, 641 F.2d 339 (5th Cir. 1981), argued that the word “separate” can only be understood to refer to the filing status of married filing separately.

The Tax Court, following its own precedent and rejecting Glaze as not binding precedent within the Eighth Circuit, to which the case could be appealed, held that head-of-household returns are included as separate returns within the meaning of Sec. 6013(b).

Holding: The Eighth Circuit reversed and remanded the Tax Court’s decision, based on rules of statutory construction and the legislative history of Sec. 6013(b).

The appeals court acknowledged that when viewed alone, Sec. 6013(b)(1) is ambiguous with respect to the meaning of “separate return.” However, the court cited the guiding principle that “identical words used in different parts of the same act are intended to have the same meaning,” noting that the term appears “numerous times throughout the Code.” In analyzing Secs. 1(d) (tax table for married individuals filing separate returns) and 6654(d)(1)(C)(ii) (estimated tax for married individuals filing a separate return), the court concluded that “separate returns” means married filing separately. A review of Sec. 7703(b) (certain married individuals living apart not considered married for purposes of claiming dependent deductions) further evidenced that ” ‘[s]eparate return’… refers to a married-filing-separately return made by a taxpayer who is considered married.” This conclusion also is supported by the Internal Revenue Manual and various IRS publications, the court said. “To interpret otherwise,” the court stated, “would contradict the plain language and harmony of the Code.” Further, the court rejected the IRS’s reliance on Rev. Rul. 83-183, which held that “separate return” in Sec. 6013(b) referred to any non-joint return, including one filed as head of household.

In analyzing the legislative intent of Sec. 6013(b), the court inferred that “Congress created §6013(b) to allow taxpayers to switch to a joint return after initially electing to file as married filing separately … to relieve taxpayers from overpaying on their taxes due to an improvident initial election between these two filing statuses.”

The court thus concluded that a head-of-household return is not a separate return under Sec. 6013(b). Therefore, Ibrahim was not prohibited by Sec. 6013(b)(2) from amending his filing status to married filing jointly.

• Ibrahim, No. 14-2070 (8th Cir. 6/10/15)

—By Raymond C. Speciale, Esq., CPA, associate professor of accounting and law, Mount St. Mary’s University, Emmitsburg, Md.