788 / If spouses move from a community property state to a common law state, will their community property rights in the property they take with them be recognized and protected by the law of their new domicile?

Yes.¹ Thus, if the spouses report their incomes separately, the income from the community property or from property into which the community property is traceable is reported by the spouses as belonging one-half to each.² If income is community income, the deductions applicable to it must be taken one-half from each spouse’s portion if they file separately.³ But if community property is commingled with one spouse’s separate property so that the original community property cannot be traced, the income from the property must be reported as that spouse’s separate income, if the spouses file separately.⁴

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1. Johnson v. Commissioner, 7 BTA 820 (1927).

2. Phillips v. Commissioner, 9 BTA 153 (1927).

3. Stewart v. Commissioner, 95 F.2d 821 (5th Cir. 1938).