Subject: Re: tax ($5,000 treaty deduction ?)

From: [email-masked] (Yi Guo)
Date: Wed, 9 Mar 94 14:13:31 CST

| Could anybody help me to answer the following questions?
| 1. Can a LAD still take $5000 tax deduction if the lad keeps student
| status?

  If the LAD was not a PR during the year 1993, he/she can still enjoy the
  $5,000 tready deduction.  The IRS helpline answered this to me lately.

| 2. If a LAD can deduct thsi $5000, can they file 1040EZ or they have to
| use 1040NR?

  I used 1040EZ to file joint return (I got my PR last year).  This way I can
  use the $5,000 from my wife. :-)

| Thanks a lot,
|

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From: [email-masked] (Yi Guo)
Date: Wed, 9 Mar 94 19:53:01 CST

Thanks Pal.  I really think your posting made the point.  Sorry I may have
dispersed wrong info to all of you folks out there.  Although I told you what I
was told by the IRS helpline lady, I really cannot stick to that with your more
authoritive source (the IRS helpline lady sounded to me not very much familiar
with the alien filings, maybe she made a mistake which was cherished by me).

For single returns, what Zhou Chen had said is correct and directly applicable.
For joint returns, just a bit more corrected thinking to augment the principle
outlined by Zhou:
For a PR with a spouse which was not a PR during the past year, they can elect
to:
	1) The LAD spouse file 1040NR to claim the treaty deduction and U.S.
   	   exemption. 
	   The PR file 1040NR and form 8xxx for dual status filing to claim
	   partial treaty deduction and partial U.S. exemption.  And file
	   1040EZ to claim partial standard deduction and U.S. exemption.
	   (I may be wrong in the detail of this).
	   This is what is called married couple filing separately.
        2) The couple file 1040EZ jointly, claiming the combined amount allowed
   	   for a couple (standard deduction and exemption).  The amount this
	   year is $10,900 allowed.
	   This way, the LAD spouse cannot use the $5,000 treaty deduction
	   towards his/her part of income; the PR cannot use partial treaty
	   deduction as is possible if filing dual status.
	   Joint filing is allowed in this case because the PR can drag along
	   the LAD spouse filing jointly (refer to Publication 519 for
	   details).

For those married folks with LAD spouse (whom I believe are the main
constituents of this group), you may do a bit calculation on which way to
choose: 
Suppose your income is X, and your LAD spouse' income is Y:
	The taxable income under choice 1) is:
           X - <partial treaty deduction> - <partial standard deduction> 
	   - exemption
           + max((Y - 5,000), 0) - exemption
	The taxable income under choice 2) is:
           X + Y - 10,900

Therefore if your LAD spouse' reported income is not significant compared with
$5,000, choice 2) maybe your pick since you can claim all of your LAD spouse'
standard deduction and exemption compared with the choice one that you can only
claim your part of the partial treaty deduction, partial standard deduction,
and exemption (which I believe will be less than 10,900).

Thanks again, Pal!

Zhou Chen wrote:
| Hi, pal, I think you made a mistake.
| Last month in a seminar held by IRS in our university, the IRS person said
| that you cannot use $5000 deduction in any of 1040EZ, 1040A and 1040 because these forms are for PR or citizens, while tax treaty is for non-residence aliens.
| If you want to use $5000 deduction, you have to use 1040NR. Even if you want to file a dual-state tax return, you have to file both 1040NR for the $5000 in the 
| first half year and 1040EZ or 1040A for the second half year. For Lad, I think they should file 1040NR because they were not PR in 1993 and they can use the $5000 deduction. For PR(single, under CSPA), dual-state is a good way to file tax
| return, but you have to file 1040EZ and 1040NR(and another form called 8xxx, I 
| forgot the exact name).