MFS return in a community property state

[NotEasy]

Does anyone have the experience to file a Married Filing Separately return in a community property state like California? Did you divide up the income of the husband and wife half and half and report them accordingly in their separate return like what the rules seem to tell us to do? It just seem to me it's a very strange way to report their income.and I cannot help thinking that I have misunderstood what the rules say.

[Roland Slugg]

That's right

That's what we did at the large Firm I worked for in CA in those rare situations when a married couple filed MFS. This 50/50 split applies to earned income as well as income from jointly owned and community property, but I don't think you do it with income/losses from separately owned property and investments.

[S T]

MFS Calif

Wait a minute,

It depends! Are they or did they live together anytime throughout the tax year? If they did not you have a bigger problem.

If they lived together all year, then yes you just split 50/50 income and expenses with the exception of Social Security benefits and a few other items.

If they lived together only part of the year, say 5 months out of 12 then separated, then you have a much bigger calculation to do. you would take 50/50 of the first 5 months and allocate to each and add that to the other 7months that was separate income.

This is not fun to do, I have had to do it several times.

Here is a link http://www.ftb.ca.gov/forms/97_forms/97_1051a.pdf

Sandy

[travis bickle]

community property states vary

there are those that follow the "texas rule" and those that follow the "california rule", be sure you know what kind of state you are discussing.

[NotEasy]

That's what we did at the large Firm I worked for in CA in those rare situations when a married couple filed MFS. This 50/50 split applies to earned income as well as income from jointly owned and community property, but I don't think you do it with income/losses from separately owned property and investments.

How is separate property defined?

If the taxpayer owns a bank account under his name only, is it automatically considered separate property? Thank you.

[S T]

State

Travis pointed out a very important point.

So what Community Property State are we talking about?
Sandy

[NotEasy]

Travis pointed out a very important point.

So what Community Property State are we talking about?
Sandy

We are in California.

[travis bickle]

read Paragraph 4215

We are in California.

at this url

http://books.google.com/books?id=pXBCx97UpbUC&pg=PT136&lpg=PT136&dq=%22california+rule%22+%22texas+rule%22+community+property&source=web&ots=2JoIukyfTZ&sig=9EZgx681Fb_4d0RgkwoAV8LUg4A#PPT136,M1

it is published by CCH and gives a good, succinct, rendition of "texas rule" and "california rule" and a brief example.

it will help you sort things out.

[joanmcq]

If the bank account does not have any community income and has not been 'tainted' by community income deposits, then it MAY be separate property. Separate property generally is property owned before the marriage that has not been 'tainted' by community property. All wages earned during the community are community income, so for the bank account example, if the account existed before the marriage, and no community funds were deposited during the marriage, then it would remain separate property. If you comingle separate and community property, it can become tainted and thus become community property. In CA, the community ends when the couple separates (into separate households) so if they did not live together during the year, you do not split wages, etc, as you would if they did.

[S T]

Worksheet

CFS Tax Tools has an income Splitting Worksheet for Community Property, Really helps.
Also there is another worksheet and some examples in Pub 555.
I am working on one of these now, where they separated in September 07.
What fun!

Sandy

[taxxcpa]

Separate property

How is separate property defined?

If the taxpayer owns a bank account under his name only, is it automatically considered separate property? Thank you.

Separate property or separate income would be based on property acquired before marriage. I believe that if you commingle the separate property, e.g. a bank account with community property, e.g. a joint bank account, then it becomes community property.

You probably need to check the IRS web site since there are a lot of rules that can't be fully covered in this forum and some questions that may not occur to you even if someone could answer them.