community property rules

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maskdoll
Posts: 6
Joined: Sat Aug 17, 2019 12:40 am

community property rules

Post by maskdoll » Thu Aug 22, 2019 2:30 am

I searched the forum, but didn't find any posts related to community property rules.
So I post my questions here.
California is the community property state. Taxpayer is California resident, while spouse and kids live in Canada.
If the Taxpayer files married filling separately, how to report wage, interest, rental and other income?
From PUB 555 page 8, it seems that wage can be reported as the ordinary approach, but interest, dividend, rental income should be subject to community property rules. So 50% allocates to the spouse. But as a non-resident alien, the spouse won't need to file Fed/California tax returns.
Should the spouse report her Canadian income on form 8958?

Califonia's PUB 1031 is very confusing. The table on page 13 shows that half of the income earned by non-California resident should be reported by his California spouse. So it's conflicting with the Fed ---- 100% wage reported by the one who performed the services.

So what shall we do? It's so hard to get it right.

MGeorge
Posts: 309
Joined: Fri Jun 22, 2012 9:23 am
Location: Canada

Re: community property rules

Post by MGeorge » Mon Jan 20, 2020 12:04 pm

Hello,

A married couple living apart has special rules regarding community property.
There is a section in publication 555 called "community property rules disregarded". I believe that you just report income you earned. Passive income is more complicated and probably still received community property treatment. Your spouse lives in Canada, and, unless you were married in Quebec before (1970?) then Canada isn't community property (all provinces to my knowledge). In this case, your spouse's passive income can likely be omitted, but I'm not an expert in this matter. I had a question for Max Reed from SKL tax - I know he deals with these matters for a fee.

I hope this helps!

As an aside for other readers - Quebec's community property regime is still available today under election only. It isn't the default regime.
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MGeorge is neither an accounting nor taxation professional.

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