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Several posters from Spidell have said that, under Calhoun v Comm, Unemployment income is a community property, and is deemed to be 1/2 received by each community property member, so that splitting a return into MFS gives each partner a $10,200 exclusion under the provisions of the American Rescue Act.
After reading Calhoun, I decided I agreed with that position.
But Fred Stein on the CSEA board has brought forward an analysis by Tom Gorczynski, at https://www.tomtalkstaxes.com/p/tom-talks-taxes-april-2-2021. Tom cites Revenue Ruling 55-246 and Renoir v. Comm, especially the conclusion by the Tax Court in Renoir, “Without a clear-cut statutory mandate, we would not attribute to the Congress an intention to authorize a double exclusion of such income for taxpayers in community property States as compared with other taxpayers.”
I’m a practitioner, not a tax attorney. Can the attorneys at Spidell take another look at its position in view of Renoir, and post the opinion here?
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Jerry,
<div>We agree that there is a division in the tax community on this issue, which is why we are advising people to put returns on extension to see if the IRS issues additional guidance in this area. The Renoir case deals with the IRC Sec. 911 foreign income exclusion, and the cases that I have found that cite the Renoir case for the proposition that disparate treatment for community property taxpayers should be disfavored absent clear Congressional intent also deal with the foreign income exclusion. These cases ruled against taxpayers’ doubling the limited foreign income exclusion solely based on community property tax laws. However, the ARPA UI exclusion (Sec. 9042 of the Act) specifically allows each spouse to claim the exclusion for UI benefits received. We feel that the standard community property treatment splits the income of one spouse 50% with the other spouse (such as in Calhoun). Furthermore, it’s fairly common for taxpayers to treat income and deductions differently in a community property states than in non-community property states and we’re not aware of any other court decisions that have disallowed that treatment.</div>
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<div>Again, we understand this area is unclear and reasonable minds may differ.</div> -
Historical trivia: the reason why the election to file MFJ was introduced in the first place was because of community income inequities without it.
Even more basic, the new tax law states that unemployment income “received” is temporarily excluded. Having property rights does not mean the same thing as directly receiving. Even with ordinary community property issues, typically only one spouse actually “receives” the income.
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