[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.66-1]

[Page 105-106]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.66-1  Treatment of community income.

    (a) In general. Married individuals domiciled in a community 
property state who do not elect to file a joint individual Federal 
income tax return under section 6013 generally must report half of the 
total community income earned by the spouses during the taxable year 
except at times when one of the following exceptions applies:
    (1) The spouses live apart and meet the qualifications of Sec. 
1.66-2.
    (2) The Secretary denies a spouse the Federal income tax benefits 
resulting from community property law under Sec. 1.66-3, because that 
spouse acted as if solely entitled to the income and failed to notify 
his or her spouse of the nature and amount of the income prior to the 
due date for the filing of his or her spouse's return.
    (3) A requesting spouse qualifies for traditional relief from the 
Federal income tax liability resulting from the operation of community 
property law under Sec. 1.66-4(a).
    (4) A requesting spouse qualifies for equitable relief from the 
Federal income tax liability resulting from the operation of community 
property law under Sec. 1.66-4(b).
    (b) Applicability. (1) The rules of this section apply only to 
community income, as defined by state law. The rules of this section do 
not apply to income that is not community income. Thus, the rules of 
this section do not apply to income from property that was formerly 
community property, but in accordance with state law, has ceased to be 
community property, becoming, e.g., separate property or property held 
by joint tenancy or tenancy in common.
    (2) When taxpayers report income under paragraph (a) of this 
section, all

[[Page 106]]

community income for the calendar year is treated in accordance with the 
rules provided by section 879(a). Unlike the other provisions under 
section 66, section 66(a) does not permit inclusion on an item-by-item 
basis.
    (c) Transferee liability. The provisions of section 66 do not negate 
liability that arises under the operation of other laws. Therefore, a 
spouse who is not subject to Federal income tax on community income may 
nevertheless remain liable for the unpaid tax (including additions to 
tax, penalties, and interest) to the extent provided by Federal or state 
transferee liability or property laws (other than community property 
laws). For the rules regarding the liability of transferees, see 
sections 6901 through 6904 and the regulations thereunder.

[T.D. 9074, 68 FR 41070, July 10, 2003]