DC - MFS

[ILLMAS]

Can someone confirm if this applies to residents of DC that want to file MFS?  From Pub 555, TP's need to report half of their their community income VS the DC-40 instructions for MFS contradicts Pub 555, TP will each report only their income.   Which is the correct way to prepare a MFS DC return?  In the past, our office would prepare a couple's tax return in a common law state and the income was always split between each other (state of TX).

 Thanks

From Pub. 555

Community or Separate Property and Income If you file a federal tax return separately from your spouse, you must report half of all community income and all of your separate income. Likewise, a registered domestic partner must report half of all community income and all of his or her separate income on his or her federal tax return. You each must attach your Form 8958 to your return showing how you figured the amount you are reporting on your return. Generally, the laws of the state in which you are domiciled govern whether you have community property and community income or separate property and separate income for federal tax purposes. The following is a summary of the general rules. These rules are also shown in Table 1. Community property. Generally, community property is property: • That you, your spouse (or your registered domestic partner), or both acquire during your marriage (or registered domestic partnership) while you and your spouse (or your registered domestic partner) are domiciled in a community property state; • That you and your spouse (or your registered domestic partner) agreed to convert from separate to community property; and • That can't be identified as separate property. Community income. Generally, community income is income from: • Community property; • Salaries, wages, and other pay received for the services performed by you, your spouse (or your registered domestic partner), or both during your marriage (or registered domestic partnership) while domiciled in a community property state; and • Real estate that is treated as community property under the laws of the state where the property is located. Separate property. Generally, separate property is: • Property that you or your spouse (or your registered domestic partner) owned separately before your marriage (or registered domestic partnership); • Money earned while domiciled in a noncommunity property state; • Property that you or your spouse (or your registered domestic partner) received separately as a gift or inheritance during your marriage (or registered domestic partnership); • Property that you or your spouse (or your registered domestic partner) bought with separate funds, or acquired in exchange for separate property, during your marriage (or registered domestic partnership); • Property that you and your spouse (or your registered domestic partner) converted from community property to separate property through an agreement valid under state law; and • The part of property bought with separate funds, if part was bought with community funds and part with separate funds. Separate income. Generally, income from separate property is the separate income of the spouse (or the registered domestic partner) who owns the property. In Idaho, Louisiana, Texas, and Wisconsin, income from most separate property is community CAUTION income.

VS

DC-40 instructions

Married or registered domestic partner filing separately If you are married or have a registered domestic partner and both spouses/partners had income, you can use this filing status. You will each report only your own income, deductions, and credits. You will each report one-half of the income from any securities, bank accounts, real estate, etc., that are registered or titled in both names.

[Pacun]

I don't deal with community states so I am answering from a logic point of view. So if you live in DC and are required to file DC, you don't live in a community state anymore and you report only your income. 

Some times it is easier to deal with the specific situation with numbers and circumstances and then you prepare the returns or look for solutions. Let's say someone lived with their husband in a community state and husband earned 60K of which wife has to report $30K. Then on July 1st, the wife moved to DC and earned $45K in DC.  and lets say the husband stayed in the old state and earned another $60. I would have a two possible solutions:

1.- Report $30K in the community state and in DC enter $75K in income and $30K as income received while a non-resident. Reporting and paying taxes on $45K to DC.

2.- Report $60K (not sure if correct because she no longer lived in a community state) and $45K earned in DC. The deduct $30 and pay taxes on $75K. This doesn't look good but I want to see what others say. 

Since I don't know how it works, will the wife gracefully transfer $22,500 of her DC income to her husband? I continue liking option 1 above.