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Possible refund opportunity: Windsor v. United States

As many of our clients know, the United States Supreme Court is hearing two cases related to the federal Defense of Marriage Act (“DOMA”) next week. The high Court will hear oral arguments in Windsor v. United States on Wednesday, March 27, 2013. If the plaintiff, Edie Windsor, prevails, she will be entitled to a $363,000 refund (plus interest) of estate tax imposed on the estate of her spouse Thea Spyer, who died in 2009. Ms. Spyer’s estate incurred this tax expense because DOMA dictates that the one hundred percent spousal exemption under IRC section 2056(a) is unavailable to same sex couples.

The deadline to file individual income tax returns was on Wednesday, April 15 for 2009. Even if Ms. Windsor prevails and DOMA is ruled unconstitutional, we do not anticipate that the Court will issue an opinion before April 15, 2013, when the statute of limitations to file amended returns for tax year 2009 expires. Same sex couples who were legally married in 2009 under the laws of their state and would have been entitled to a tax refund in that year if they were eligible for the “married filing jointly” status, may consider filing a protective refund claim for that period. The IRS’s policy where there is ongoing litigation or the law is uncertain, is to collect the properly filed protective refund claims and either pay them or deny them when the law in the applicable area is settled. Even if Ms. Windsor does not prevail or if her case is dismissed on procedural grounds, such filings may eventually result in significant payments if DOMA is ultimately held unconstitutional. These refunds would be paid with interest calculated from the original due date of the return.