- 13 -
on only one-half of that community income for Federal tax
purposes.
Respondent now recognizes that all of STG's income is
community income under California law. Respondent also
stipulated that $119,204 of STG's net profit for 1992, the amount
which was transferred to petitioner's and Mrs. Shea's household
checking account in 1992, was community income reportable by each
spouse in the amount of $59,602. The parties dispute whether
STG's 1992 net profit in excess of $119,204 should all be
attributed to petitioner, regardless of community property law.
On brief, respondent relies solely on the provisions of section
66(b) to deny petitioner the income-splitting benefits of
California's community property law. Section 66(b) provides:
The Secretary may disallow the benefits of any
community property law to any taxpayer with respect to
any income if such taxpayer acted as if solely entitled
to such income and failed to notify the taxpayer's
spouse before the due date (including extensions) for
filing the return for the taxable year in which the
income was derived of the nature and amount of such
income.
Petitioner acknowledges that section 66(b) authorizes the
Commissioner to disallow the benefits of any community property
law to a taxpayer with respect to any income if (1) the taxpayer
acted as if he were solely entitled to such income, and (2) the
taxpayer failed to notify the taxpayer's spouse of the nature and
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011