The Internal Revenue Service has issued a
The private letter ruling treats the income earned by registered domestic partners in California as community property income, reversing an earlier ruling from 2006. The IRS said that a taxpayer must report on his or her individual federal income tax return one-half of the combined income that the taxpayer and his or her domestic partner earn from the performance of personal services and one-half of the combined income derived from their community property assets.
The taxpayer is then entitled to half of the credits for income tax withholding from the wages of the taxpayer and domestic partner. The requirement under California law to treat a taxpayers earnings as community property, and thus half of the taxpayers earnings as vested in his or her partner, does not result in a transfer of property by the taxpayer to the domestic partner for federal gift tax purposes under Section 2501 of the Tax Code.
The IRS also issued two Chief Counsel Advice memorandums supporting the private letter ruling. In one
In the other
While the IRS rulings do not mean that the federal government recognizes same-sex marriages, they do indicate that the federal government as usual recognizes state property laws, noted the