Can you provide any pointers to specific IRS guidance about your recommendation to use option A?
I’m thinking the answer is either B or C based on the wording of IRS Pub 555. Page 10 says “On the appropriate lines of your separate return, list only your share of the income and deductions on the appropriate lines of your separate tax returns (wages, interest, dividends, etc.).” but doesn’t mention basis or gains/loss.
Elsewhere in Pub 555 it says “
Gains and losses.
Gains and losses are classified as separate or community depending on how the property is held. For example, a loss on separate property, such as stock held separately, is a separate loss. On the other hand, a loss on community property, such as a casualty loss to your home held as community property, is a community loss. See Pub. 544, Sales and Other Dispositions of Assets, for information on gains and losses.”
Looking in Pub 544 doesn’t include the term “community property” anywhere.
