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married person during the marriage while domiciled in California.
Cal. Fam. Code sec. 760 (West 2004). Under California law, there
is a rebuttable presumption that all property acquired during
marriage is community property. Hanf v. Summers, 332 F.3d 1240,
1242-1243 (9th Cir. 2003); Haines v. Haines, 39 Cal. Rptr. 2d
673, 681 (Ct. App. 1995). It follows that there is a rebuttable
presumption that all income derived during the marriage while
domiciled in California is community property. See, e.g., Dooley
v. Commissioner, T.C. Memo. 1992-39. Since Federal income tax
liability follows ownership with respect to income, there is a
rebuttable presumption that any income derived in a marriage in
California is taxable as community income. See United States v.
Mitchell, supra at 197.
Spouses who reside in a community property State may file
either a joint Federal income tax return or separate Federal
income tax returns. If separate returns are filed, then
generally each spouse must report and pay tax on one-half of the
community income, regardless of whether the spouse actually
received that income. Id. at 196-197; Hardy v. Commissioner, 181
F.3d 1002 (9th Cir. 1999), affg. T.C. Memo. 1997-97; Bernal v.
Commissioner, 120 T.C. 102, 105-106 (2003).
B. Petitioner’s Community Income
The potential sources of community income in this case are:
(1) The items of income reported on petitioner’s return totaling
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