Question

Jim and Nora, residents of a community property state, were married in early 2014. Late in 2014 they separated, and in 2015 they were divorced. Each earned a salary, and they received income from community owned investments in all relevant years. They filed separate returns in 2014 and 2015. In 2015, how should Nora report her income on her separate return?

1) Nora must report only her salary and one-half of the income from community property on her separate return.
2) Nora must report on her separate return one-half of the Jim and Nora salary and one-half of the community property income.
3) Nora must report on her separate return one-half of the Jim and Nora salary for the period they were married as well as one-half of the community property income and her income earned after the divorce.
4) Nora must report only her salary on her separate return.
5) None of these.

Answer 1

Nora should report one-half of the combined salaries of herself and Jim while they were married, one-half of the income from community property investments, and her income post-divorce on her separate return.The correct answer is option 3.

Step-by-step explanation:

The question pertains to how Nora should report her income on her separate return in 2015 after divorcing Jim. In a community property state, the law requires that income earned during the marriage is considered community property and should be split equally between the spouses.

Therefore, the correct answer is that Nora must report one-half of the combined salaries of Jim and herself for the period they were married, as well as one-half of the income from community property investments, and any income she earned after the divorce on her separate return.

This accounts for the fact that until their divorce, both Jim and Nora's earnings and income from investments were part of the community property.