Question

For 20X1, Bob and Jill lives in a community property state and had community income under state law. They were married part of the year; however, they lived apart the entire year. They did not file a joint income tax return for 20X1. Bob is requesting relief in 20X2. Which of the following would provide an exception to the general 50/50 rule for community income.

a IRC Sec. 66(a) b. IRC Sec 66(b) c. IRC Sec 6015(b) d. IRC Sec 6015(c)

Answer 1

Under Section 66(a) of the Internal Revenue Code, in certain circumstances a married couple can “qualify” to be taxed as though they live in a non-community property state and thus avoid being required to divide their incomes for reporting purposes.

In order to qualify for this treatment, the couple must:

(1) be married,

(2) live apart,

(3) have earned income,

(4) not file a joint return, and

(5) cannot have made any transfers of community earned income during the tax year.

If a taxpayer fails any one of these tests, the taxpayer will not be granted relief under IRC §66(a) from the community income reporting rules.

Since all the above five conditions are fulfilled by Bob and Jill, hence IRC Sec.66(a) provide an exception to the general 50/50 rule for community income.