[Code of Federal Regulations]
[Title 26, Volume 12]
[Revised as of April 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.1402(a)-8]

[Page 17-18]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1--INCOME TAXES--Table of Contents
 
Sec. 1.1402(a)-8  Community income.

    (a) In case of an individual. If any of the income derived by an 
individual from a trade or business (other than a trade or business 
carried on by a partnership) is community income under community 
property laws applicable to such income, all of the gross income, and 
the deductions attributable to such income, shall be treated as the 
gross income and deductions of the husband unless the wife exercises 
substantially

[[Page 18]]

all of the management and control of such trade or business, in which 
case all of such gross income and deductions shall be treated as the 
gross income and deductions of the wife. For the purpose of this special 
rule, the term ``management and control'' means management and control 
in fact, not the management and control imputed to the husband under the 
community property laws. For example, a wife who operates a beauty 
parlor without any appreciable collaboration on the part of her husband 
will be considered as having substantially all of the management and 
control of such business despite the provision of any community property 
law vesting in the husband the right of management and control of 
community property; and the income and deductions attributable to the 
operation of such beauty parlor will be considered the income and 
deductions of the wife.
    (b) In case of a partnership. Even though a portion of a partner's 
distributive share of the income or loss, described in section 
702(a)(9), from a trade or business carried on by a partnership is 
community income or loss under the community property laws applicable to 
such share, all of such distributive share shall be included in 
computing the net earnings from self-employment of such partner; no part 
of such share shall be taken into account in computing the net earnings 
from self-employment of the spouse of such partner. In any case in which 
both spouses are members of the same partnership, the distributive share 
of the income or loss of each spouse is included in computing the net 
earnings from self-employment of that spouse.