Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 79-23

1979-1 C.B. 3

Section 1
Section 2
Section 3
Section 42
Section 63
Section 143

IRS Headnote

Head of household; nonresident alien spouse. A U.S. citizen or resident alien who was married to and living with a nonresident alien and their dependent child in 1977 may use the head of household tax taxable or tax rate schedule and is entitled to the zero bracket amount for heads of household in computing taxable income for 1977. For purposes of computing the general tax credit, the taxpayer is not subject to the limitations of section 42(c) of the Code.

Full Text

Rev. Rul. 79-23

ISSUES

(1) For purposes of computing taxable income under section 63 of the Internal Revenue Code of 1954, what is the zero bracket amount of a taxpayer, a United States citizen who for all of 1977 was married to and lived with a nonresident alien and their child, a dependent within the meaning of section 151, where no election under section 6013(g) was in effect for 1977?

(2) For purposes of computing the general tax credit, is the taxpayer subject to the limitation of section 42(c), which applies to married individuals who file separate returns?

(3) May the taxpayer use the rate schedule and the tax table prescribed by sections 1 and 3 for heads of household?

LAW AND ANALYSIS

The applicable sections of the Code are sections 2(b), relating to the definition of head of household; 1(b), relating to the imposition of tax on the taxable income of a head of household; 63(b), relating to the definition of the taxable income of an individual; 63(d), relating to the zero bracket amount; 3, relating to the imposition of tax on the tax table income of an individual in lieu of the tax imposed by section 1; and 42, relating to the general tax credit.

Section 2(b)(2)(C) of the Code provides that for purposes of qualifying for the head of household status a taxpayer is considered as not married at the close of a taxable year if at any time during the taxable year the taxpayer's spouse is a nonresident alien.

In this case, the taxpayer qualifies for head of household status under section 2(b) of the Code, because the taxpayer is considered not married under section 2(b)(2)(C) and is entitled to a deduction for the dependent child under section 151. See also Rev. Rul. 55-711, 1955-2 C.B. 13.

Under the rate schedule provided for heads of household by section 1(b) of the Code, no tax is imposed on the first $2,200 ($2,300 for taxable years beginning after December 31, 1978) of taxable income of an individual who is a head of household.

Section 63(d) of the Code provides, in part, that for federal income tax purposes the term "zero bracket amount" means $2,200 ($2,300 for taxable years beginning after December 31, 1978) in the case of an individual who is not married and who is not a surviving spouse and $1,600 ($1,700 for taxable years beginning after December 31, 1978) in the case of a married individual filing a separate return.

Section 42(a) of the Code allows a general tax credit against the tax imposed by sections 1 or 3. Section 42(c) limits the amount of the general tax credit available to married individuals who file separate returns for the taxable year.

Sections 63(h) and 42(c)(2) of the Code provide that for purposes of sections 63 and 42(c)(1), respectively, marital status shall be determined under section 143. Under section 143, the taxpayer in this case is considered married.

Under section 63 of the Code, if an individual itemizes deductions, only those itemized deductions that exceed the individual's zero bracket amount are deductible from adjusted gross income in determining taxable income. Under section 1, then, tax is imposed only on the individual's taxable income that exceeds the individual's zero bracket amount. If an individual does not itemize deductions, tax is also imposed only on the individual's taxable income that exceeds the zero bracket amount.

Section 3 of the Code imposes a tax, in lieu of the tax imposed by section 1, on the tax table income of every individual whose tax table income for the taxable year does not exceed the ceiling amount for the taxable year. The tax is determined under tables prescribed by the Secretary for the taxable year and is computed on the basis of the rates provided for in section 1. Built into the tables are the zero bracket amount, the deductions for personal exemptions provided by section 151, and the general tax credit allowed by section 42.

It was Congress' intent that the same zero bracket amounts underlying the tax rate schedule of section 1 of the Code should be used as the zero bracket amount under section 63(d) for purposes of determining taxable income. H. Rep. No. 95-27, Part 1, 95th Cong., 1st Sess. 38-42 (1977), 1977-1 C.B. 501; and S. Rep. No. 95-66, 95th Cong., 1st Sess. 48-52 (1977), 1977-1 C.B. 469. It was also Congress' intent then, that all taxpayers who file as a head of household have a zero bracket amount equivalent to that of a single individual. H. Rep. No. 95-263, 95th Cong., 1st Sess. 24 (1977), 1977-1 C.B. 519. Further, when a literal reading of a section of the Code will result in an absurd or unreasonable result when that section is read in light of other sections, the legislative intent must be followed instead. See J.C. Penny Co. v. Commissioner, 312 F.2d 65 (2nd Cir. 1962); and United States v. Diversified Services, Inc., 312 F.2d 393 (8th Cir. 1963).

Therefore, because section 2(b)(2)(C) of the Code treats an individual as single for purposes of qualifying for the head of household rates under section 1(b), and because Congress intended that the same zero bracket amount be used for a taxpayer whether the taxpayer uses the tax tables or rate schedules, section 2(b)(2)(C) should also govern the taxpayer's marital status for purposes of determining the taxpayer's zero bracket amount under section 63(d). The taxpayer's zero bracket amount will be equivalent to that of a single taxpayer's and equivalent to the zero bracket amount built into the head of household tax rate schedule.

Based on the legislative intent of Congress in amending sections 1, 3 and 42 of the Code, section 2(b)(2)(C) should also govern the taxpayer's marital status for purposes of determining the taxpayer's amount of general tax credit under section 42(a). Because the taxpayer is considered not married under section 2(b)(2)(C) the limitation of section 42(c) is not applicable. This is so even though sections 63(h) and 42(c)(2) provide that marital status for purposes of sections 63 and 42(c)(1), respectively, is determined under section 143.

HOLDINGS

(1) The taxpayer is entitled to use the head of household tax rate schedule prescribed by section 1(b) of the Code and, for purposes of computing taxable income under section 63, the taxpayer's zero bracket amount is $2,200.

(2) For purposes of computing the general tax credit, the taxpayer is not subject to the limitation of section 42(c).

(3) The taxpayer may use the tax table prescribed by section 3 for heads of household, provided the taxpayer's tax table income for the taxable year does not exceed the ceiling amount and provided the taxpayer is not otherwise precluded from using the tax table.

The holdings in this Revenue Ruling apply equally to a resident alien taxpayer married to a nonresident alien.