- 10 - partners under section 702 in accordance with his or her interest in the partnership and is reflected in each partner's adjusted basis in the partnership pursuant to section 705(a). See secs. 702(a)(1), (2), and (3), 705(a); Babin v. Commissioner, supra; Gershkowitz v. Commissioner, 88 T.C. 984, 1005 (1987). In the case of a partnership, the insolvency exception to the recognition of COD income provided by section 108(a) is applied at the partner level. See sec. 108(d)(6). As we have found, the COD income was an item of partnership income that passed through to the partners. We now turn to State law to ascertain who owned this income. Texas is a community property State. Tex. Fam. Code Ann. secs. 3.001-3.005 (West 1998); Lange v. Phinney, 507 F.2d 1000, 1005 (5th Cir. 1975). Generally, spouses residing in a community property State are liable for the Federal income tax on one-half of their community income. United States v. Mitchell, supra. Income and deductions attributable to community property are also petitioners' community property. See Tex. Fam. Code Ann. secs. 3.001, 3.002; Adams v. Commissioner, 82 T.C. 563, 567-568 (1984); Hockaday v. Commissioner, 22 T.C. 1327, 1329 (1954); Harris v. Harris, 765 S.W.2d 798, 802 (Tex. App. 1989); Marshall v. Marshall, 735 S.W.2d 587, 594 (Tex. App. 1987).9 9 The decisions of the State's highest court are conclusive as to that State's law, but in the absence of a decision by that (continued...)Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011