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B. Application of Community Property Law in 1992
Petitioner's 1992 return was filed as a joint return. In
the notice of deficiency, respondent changed petitioner's filing
status from married filing jointly to married filing separately.
Nevertheless, respondent determined petitioner's unreported
income without making any adjustment for California's community
property law. The notice of deficiency does not refer to
California community property law, any exceptions to such law, or
any facts that might support such exceptions.
Married persons who reside in a community property State are
generally each required to report one-half of their community
income for Federal income tax purposes. United States v.
Mitchell, 403 U.S. 190 (1971); Drummer v. Commissioner, T.C.
Memo. 1994-214, affd. without published opinion 68 F.3d 472 (5th
Cir. 1995). Petitioner contends that under California law, the
1992 income generated by petitioner's consulting business is
community income and that he is required to report and be taxed
9(...continued)
Less:
Conceded deductions 48,565.34 32,551.00 1,808.00
Additional allowable
deductions 7,735.00 6,616.00 0.00
Net profit 336,231.66 356,394.00 443,172.00
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