The IRS recently has made significant pronouncements with respect to community property treatment for Registered Domestic Partners and same-sex spouses. In summary, the IRS:

  1. stated that community property is now to be reported by both spouses on their federal income tax returns; and
  2. confirmed there is no taxable gift upon creation of community property.

Up to this point, although same-sex RDP’s and same-sex spouses had to report 1/2 of community property earnings on each partner’s/spouse’s state income tax return, the “earning” partner/spouse had to report such individual’s entire earnings on his/her federal income tax return. However, on a moving forward basis, income reporting on the federal and state income tax returns will now be consistent – with 1/2 of the community property earnings being reported on each partner’s/spouse’s income tax return.

Although many practioners believed that creation of community property at the moment it is earned could not be viewed as a taxable