thank you for your question.
Florida is not a community property state.
Jointly held property can not be placed in lien to satisfy tax debts of one partner in Florida.
So you can exclude jointly held assets.
Thank you for your patience. I had opted out earlier because I had to go away for severl hours, and had hoped someone would have been able to take care of this.
My original answer was based on court rulings regarding community property laws with regard to tax.
This part of your follow on question becomes more legal than a tax question. It relates two when something becomes community marital property through mutation in a non-community property state.
In community property states for example, the supreme court has ruled, that married couples are required to claim 50% of each other's income. AND the IRS position is that they will also take that position unless the couple has agreed otherwise.
In equitible distribution states, seperately held property and debt can mutate to marital assets,and vise versa based on different circumstances, and purpose.
The IRS rules say that you include debt and assets even if they are otherwise exempted by law.
If you put all of that together, the final result is that:
If you count that debt, then even though the marital home is jointly held, you have to count the asset in total. The reason is the debt, individually held, is secured by the asset in total. (even though jointly held asset).
the joint bank accounts are another separate issue.
That money is commingled money by your state law. If you are filing a joint return, then the entire joint bank account needs to be counted in assets for the form 982.
According to the IRS with regard to the property and with regard to the bank accounts, if you file married separate returns, you can apportion these two issues to her half, and she can figure insolvency on her own.
I do not mean to confuse you on these issues. It is far easier in a community property state. What makes this complicated is that you are in an equitable and separate property state, and you have the issue of mutation of assets based on use and commingled, and other such issues. So when you commingled the bank accounts you mutated that to marital assets. In a joint return, like the marital home, you would have to include this.
My recommendation is to file married separate this year for purposes of this one issue.
The general rule about the separate property and jointly held property in your state holds true for you and her with regard to the Marital home as you described it, and the joint bank accounts. Half the home, and if the debt is all hers, then her debt.
Then on the joint accounts her half for the sake of the insolvency test.
For the car, that is all hers. she can not omit thee asset or the debt if any.
She does not have to list the mother's account to which she is a joint owner.
The issue with the joint assets had to do with the separate property laws in your state and mutation of the assets, as well as your filing status in regard to the marital home, and the debt being secured by the marital home, as well as the commingling of money in the joint account (of the marriage).
I am sorry, I do not mean to confuse you.
My original response was a general rule with regard to jointly held assets in a non-community property state, in relations to individual debt.
BUT once you told me about the marital home and the joint bank accont between you and your wife, I had to speak about the exceptions. with regard to marital assets and the thing called mutation.
the joint bank accounts are comingled. this changes the rule. I had forgot about the joint bank account issue when I stated the general rule. I was somehow focused on business assets and investment properties, as a mind set.
when If you file a joint return, the IRS would require you claim the entire account as an asset. If you file seperately, she would claim her half. This is because of the mutation issue with comingled accounts.
Again, I appologize for the confusion.
Thank you for your comments and feedback. Vivat jesus
Thanks for getting back to me. This is a highly complicated area, especially when you are from an equitable (non-community property state).
If you and your accountant call the irs at(NNN) NNN-NNNN select option 1 and option 5, you can ask for the "complicated law" division to discuss insolvency for the form 982. But these guys are on a clear the phone time line and not all sides of the issue always get discussed. They will tell you that if you file a joint return, that you have to include all assets, even if they would otherwise be excluded. They would generally be correct.
They will also tell you if your wife separately owned the (business) property on which she received the 1099-C, and you filed a separate return, that you would be able to separate out the assets.
Regarding bankruptcy: the IRS generally follows the state rules for separate bankruptcies, and so forth, but they deviate when it comes to showing solvency if you file a joint return. BUT the IRS also follows the state marital laws for marital property such as the community property laws. But application is inconsistent,and the IRS reserves the right to use their discretion.
When ever you get two or three experts together, you can get variation on how they interpret the facts. I based my comments and answers on a combination of IRS publication and IRC, case law, and FL community property laws.
But note, even if one follows the IRS publications on a subject exactly, the courts have interpreted teh code on which the pubs are based differently. This has prompted one judge to state that we "use the IRS publications at our own peril".
It is Florida and federal bankruptcy laws that exclude the joint accounts during an individual bankruptcy. BUT you should have had a choice to include one or the other.
If your accountant is a CPA he should know the codes.
But here are a few.
Section 108 of the code http://www.taxalmanac.org/index.php/Sec._108
IRS Publication 4681: http://www.irs.gov/publications/p4681/ch01.html#d0e665
IRS Publication 555, Community Property: http://www.irs.gov/pub/irs-pdf/p555.pdf
Relief From Community Property: http://www.irs.gov/irm/part25/ch11s05.html
Sections of FL law on marital and separate property: http://www.flsenate.gov/statutes/index.cfm?App_mode=Display_Statute&URL=Ch0061/ch0061.htm
Case law considered
Note, I had one I used that included treatment of jointly he,held assets. Cannot find it now. The Internet is suddenly filled with international entries on the same subject. It will take a while for me to find it again.
The botXXXXX XXXXXne here though is that our interaction does not constitute a client relationship. If you have a retained accountant or CPA, then that person has to be comfortable with how he conducts his practice. Second opinions are good because they help to explore all sides of an issue. We learn a lot along the way. But it is your accountant or CPA who will be standing with you if you are audited.
If you file a joint return, and the IRS notices that you are dividing joint assets, it will be a red flag, that will cause them to scrutinize state laws and I.R.C. They could disallow the determination or refigure it for you.
FYI: for a discussiioin of mutated property http://www.dianafriedman.com/CM/Articles/MaritalProperty.pdf