Unmarried Couple Face Tax Consequences

choi

Gerald Nissenbaum, Unmarried Couple Face Tax Consequences. Boston Herald, Oct 20, 2013.
http://bostonherald.com/entertai ... ce_tax_consequences

Note:
(a) "You both must be very careful when transferring assets to each other in order to divide your assets. There are no tax consequences on transfers between spouses during marriage, at the time of divorce or in connection with their divorce. So, for example, because you two are not married, if you transfer the house to your girlfriend, the Internal Revenue Code treats that as a sale to a third party."

Maybe not a sale to a "third party"--because there is no third person. Still, to transfer between an unmarried couple is between unrelated persons tax purpose, with accompanying tax as a gift or a sale--whether money changes hand or not. Which one, I do not know.

Sales and Other Dispositions of Assets; For use in preparing 2012 returns. IRS, Feb 19, 2013 (Publication 544)
www.irs.gov/pub/irs-pdf/p544.pdf
("No gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or a former spouse if incident to divorce. * * * Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the recipient as a gift [without tax tax] and is not considered a sale or exchange")

(b) You’ll both need to amend all your tax returns from joint to single and be prepared to learn that one of you may have to pay lots of back taxes, penalties and interest."

Because the couple wrongly presemed they were married, they filed a joint return, which is impermissible. See Revenue Ruling 2013-17. Internal Revenue Service, Aug 29, 2013.
www.irs.gov/pub/irs-drop/rr-13-17.pdf
("Holding 3: For Federal tax purposes, the terms 'spouse,' 'husband and wife,' 'husband,' and 'wife' do not include individuals (whether of the opposite sex or the same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of that state, and the term 'marriage' does not include such formal relationships")