IRS Issues Ruling – California Community Property Recognized For Registered Domestic Partners


As reported in the Continuing Education of the Bar (CEB) Blog, the IRS has just issued an important private letter ruling affecting California registered domestic partners. According to the ruling, California’s registered domestic partners must report half of their community earnings on their federal individual tax returns.

Under the ruling, if two partners have combined income of, say, $100,000 (partner A’s income = $75,000 and partner B’s income = $25,000), each would report $50,000 on his individual federal return. Each partner is entitled to one-half of the tax credits withheld from the partnership’s paychecks.

This ruling is particularly significant for registered partners where one is a high earner and the other is a low earner. Under the ruling, the couple could take advantage of splitting the income, thereby relieving the tax burden on the higher earner. Registered domestic partners in California will be permitted to amend their returns for the period December 31, 2006 to June 1, 2010.

This advantage is just one of the many tax advantages that have always been available to married couples, but before the ruling, it was not available to domestic partners under federal law.

You can also read more about the ruling at the CEB Blog here as well as a San Francisco Chronicle article about the development here.

I have also downloaded the private letter ruling to the Box, entitled IRS Ruling Letter, as well as IRS Legal Memorandum.

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