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Agree with both --- however --- given it is August --- CO is beautiful state to be married in --- even with a three week waiting (/s) they will make the time table. With their apparent reasoning to "have the situation - their way" regardless of government rules, they might be a "client - of poor recourse". Save headaches and let them do what they want --- but with someone else fighting the future IRS notices, etc..

But she has very long arms from wearing pink furry handcuffs, don't you know.

If they want to file MFJ for next year, tell 'em to take a quickie trip to Vegas instead of CO.

Hi Jack - I say what you said:. They are residents of MO. They visited CO and were not residents when the unofficiated ceremony took place. Based on the description of events, I vote that they cannot legally file a joint tax return.

Taxpayers live in a state (Missouri) that does NOT recognize common law marriage unless they were common law residents of a common law state and moves into the not-recognized state. Taxpayers visited a common law state (Colorado) and in a park declared they were married before returning to the not-recognized state. Taxpayers want to file a married filing joint federal income tax return. My review concluded they do not qualify to file a joint return as they are not considered married in their resident state. And you say?? Ref: Publication 17 (2015), Your Federal Income Tax www.irs.gov/publications/p17/ch02.html Married persons. If you are considered married, you and your spouse can file a joint return or separate returns. Considered married. You are considered married for the whole year if, on the last day of your tax year, you and your spouse meet any one of the following tests. You are married and living together. You are living together in a common law marriage recognized in the state where you now live or in the state where the common law marriage began. You are married and living apart, but not legally separated under a decree of divorce or separate maintenance. You are separated under an interlocutory (not final) decree of divorce.

Then I vote:

K-1 should be marked final, and you would mark that box on the K-1 input on the individual return. Input the disposition and resulting gain or loss on Schedule D like you would any other capital investment sold or disposed of.

Dear soon-to-be ex-client: Buh Bye!

Total difference in basis was $157, about 2/3 of which was in the client's favor and the other 1/3 went against him. So all that saved him about $21 in tax, but it was an interesting exercise for me and I won't charge for the 15 minutes or so I spent on it. lol

These situations are always tough, because when a client really needs the money and they don't realize they could lose nearly half of the withdrawal due to Fed & St taxes and penalty it is really depressing to them when we tell them the reality. The sales people should tell them what could happen, and to be sure they have plenty of money in reserve, especially in the early years of the contract when mostly interest is paid out. But I am sure it may only be mentioned briefly or not at all, why jeopardize a sale and a larger commission. Those are the people who need Rita's special hug.

IRS Reg. 20.2031-2(b): If there is a market for stocks or bonds, on a stock exchange, in an over-the-counter market, or otherwise, the mean between the highest and lowest quoted selling prices on the valuation date is the fair market value per share or bond. If there were no sales on the valuation date but there were sales on dates within a reasonable period both before and after the valuation date, the fair market value is determined by taking a weighted average of the means between the highest and lowest sales on the nearest date before and the nearest date after the valuation date.