@user17568826280 ,
Having gone over the texts of IRC 879 and California 760 etc. and reading a number of posts by tax attorneys on the subject:
(a) 879 logically puts enforceable position that when one spouse is NRA ( and not living in the US ), community property should be allocated to the one that is actually performing the earning effort. Of course there are ands/ifs./buts in this. Note that by allocating income to the actual earning person, also supports the concept of sourcing where the work is performed, does not violate any tax treaties and the tax is collectable.
(b) While I recognize that CA does not line up with IRC, it is generally silent on what /how to allocate when the NRA is not physically present in the US. Pursuing the statute literally would create a tax loss for the state, conflict with the federal return ( which is used generally as the basis of the state return) if the NRA is outside the USA, and has no financial connection to the US. The wording etc. of the statute generally seems to be based on the concept that married couples have a de-facto connection to the state. The problem here is what happens when a couple is separated ( in fact / by action etc. ) but not divorced and not living and/or connected to CA. This gets even more contorted when one spouse lives in another country, has no financial / otherwise connection to the spouse living in CA. How does CA enforce the tax collection.
(c) I have seen some suggestions ( by tax attorneys) to use pre-nup and/or post-nup agreements. What this would do is show intent / fact of total financial separation between the spouses.
Given the above . my conclusion is that :
1. if the spouses maintain a total separation of income/ expenses,
2. do not live together,
3. have no joint ownership of assets,
4. NRA spouse has NO CA source income
then one could argue that an allocation like 879 would be logical. Furthermore this would also prevent tax loss for CA ( no way to enforce tax demand on NRA whom never visits the USA / California )
I have not found any case law on this.
My apologies for delay in response.
Does this make sense ? Is there more I can do for you ?
