Treatment of community income for spouses living apart: Sec. 66 may relieve a separated spouse of the duty to report a portion of the other spouse's community property income. Part I of this two-part article discusses the requirements for relief under sec. 66(a) and denial of community property benefits under sec. 66(b).

Extract

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Treatment of community income for spouses living apart: Sec. 66 may relieve a separated spouse of the duty to report a portion of the other spouse's community property income. Part I of this two-part article discusses the requirements for relief under sec. 66(a) and denial of community property benefits under sec. 66(b).

EXECUTIVE SUMMARY

* Sec. 66 can provide a spouse relief from reporting and liability for the other spouse's income when the nonearning spouse does not receive a benefit from such income.

* If a spouse qualifies for Sec. 66(a) treatment, all items of community income must be allocated under the Sec. 879(a) rules.

* Under Sec. 66(b), a spouse may be disallowed the benefits of reporting

only his or her share of community income.

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This two-part article offers guidance on Sec. 66 relief for married clients who are separated and reside in community property states. Part I, below, discusses the requirements for relief from the community property laws under Sec. 66(a). It also examines Treasury's power to deny the benefit of the community property laws to a spouse under Sec. 66(b). Part II, in the April 2006 issue, will explain Sec. 66(c), which provides traditional or equitable relief to spouses in certain cases. By properly advising clients who may benefit from Sec. 66 relief, practitioners can determine that those clients do not unwittingly cause a relief request to be denied.

Background

Equal Allocations

The basic premise of state community property laws is that marriage is a pa...

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