42.15.322    SEPARATE RETURNS FOR MARRIED TAXPAYERS

(1) If husband and wife file separate returns, each must report their own adjusted gross income. Under no circumstances may income be arbitrarily assigned from one spouse to the other.

(2) Income from salaries, wages, bonuses, and commissions and other income derived from personal services rendered either as an employee or as an independent contractor, must be reported by the spouse who earned it.

(3) Income such as rents, royalties, dividends, and interest must be reported by the spouse who owns the property from which the income is derived. If such income is derived from property which is jointly owned by the spouses, the income must be split equally unless the taxpayers show a different proportional ownership.

(4) Income from pass-through entities must be reported by the spouse who is the partner, shareholder, member, or other owner of the interest in the pass-through entity to which the income is attributable. If such income is derived from the joint ownership of stock in a corporation, the income must be split equally unless the taxpayers show a different proportional ownership.

(5) The net income from any business conducted as a sole proprietorship or conducted by a disregarded entity that is treated as a sole proprietorship, must be reported in full by the spouse who is the individual proprietor. However, in the event the proprietor's spouse regularly and systematically renders substantive personal services in the operation of the business and with respect to which services he or she is not paid a salary or wages, the proprietor and the spouse may, at their option, agree that the spouse earned an amount equivalent to reasonable compensation for the services rendered, and such amount shall be deemed income taxable to that spouse as compensation for services rendered, and such amount shall reduce the proprietorship income taxable to the spouse who is the actual proprietor. Income deemed earned by the spouse for services rendered cannot be justified solely by a legal property-holding arrangement, but must be justified by showing a substantial contribution of personal services. The allocated amount cannot exceed the gross income derived from a sole proprietorship.

(6) This rule applies to income earned on or after January 1, 1973.

History: 15-30-2620, MCA; IMP, 15-30-2110, 15-30-2602, MCA; Eff. 12/31/72; AMD, Eff. 3/7/74; AMD, Eff. 4/5/74; AMD, 1992 MAR p. 2555, Eff. 11/26/92; AMD, 1996 MAR p. 2605, Eff. 10/4/96; AMD, 2002 MAR p. 3708, Eff. 12/27/02; AMD, 2008 MAR p. 178, Eff. 2/1/08; AMD, 2010 MAR p. 1088, Eff. 4/30/10.