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Two questions related to filing "Married filing separately"

January 09, 2017 • Peter Morfin • Log In to Post Comments

1-question realted to "real estate professional".  If the wife in the couple is the real estate professional--would she maintain that status filing separately?  And if the properties are held as communuity property is she only entiltled to 50%? and if she only gets 50& does that 50% need to be split between husband and wife even though the husband does not qulaiofy as a real estate professional?


2-same scneario as above but let's say the wife claims HI as her resident state (non-community property state) and husband claims CA as his resident state---is he required to claim half the wife's income and 



I will take your questions in order:

1) Yes, if the wife in your scenario meets the requirements of a real estate professional, then she maintains that filing status if her filing status is Married Filing Separately.  When a married couple files a joint return, the real estate professional spouse's status as a real estate professional is attributed to the other spouse.  However, when they file separately, both spouses must meet the real estate professional tests.

I your scenario, your client will have to split the community property rental income and expenses between each spouse's separate return and any losses attributable to the husband's community property share will be limited by the passive activity loss rules.

2) You will have to double check with the laws of the state of Hawaii, but generally, property acquired as community property in a community property state is NOT automatically converted into non-community property when moving to a commo law state, such as Hawaii.  So, it is likely you would have to split the rental income and expenses as in #1, above.


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