If—

(1) 2 individuals are married to each other at any time during a calendar year;

such individuals—

(A) live apart at all times during the calendar year, and

(B) do not file a joint return under section 6013 with each other for a taxable year beginning or ending in the calendar year;

(3) one or both of such individuals have earned income for the calendar year which is community income; and

(4) no portion of such earned income is transferred (directly or indirectly) between such individuals before the close of the calendar year,

The Secretary may disallow the benefits of any community property law to any taxpayer with respect to any income if such taxpayer acted as if solely entitled to such income and failed to notify the taxpayer’s spouse before the due date (including extensions) for filing the return for the taxable year in which the income was derived of the nature and amount of such income.

Under regulations prescribed by the Secretary, if—

(1) an individual does not file a joint return for any taxable year,

(2) such individual does not include in gross income for such taxable year an item of community income properly includible therein which, in accordance with the rules contained in section 879(a), would be treated as the income of the other spouse,

(3) the individual establishes that he or she did not know of, and had no reason to know of, such item of community income, and

(4) taking into account all facts and circumstances, it is inequitable to include such item of community income in such individual’s gross income,

For purposes of this section—

(1) Earned income The term “earned income” has the meaning given to such term by section 911(d)(2).

(2) Community income The term “community income” means income which, under applicable community property laws, is treated as community income.

(3) Community property laws The term “community property laws” means the community property laws of a State, a foreign country, or a possession of the United States.

(Added Pub. L. 96–605, title I, § 101(a), Dec. 28, 1980, 94 Stat. 3521; amended Pub. L. 98–369, div. A, title IV, § 424(b)(1)–(2)(B), July 18, 1984, 98 Stat. 802, 803; Pub. L. 101–239, title VII, § 7841(d)(8), Dec. 19, 1989, 103 Stat. 2428; Pub. L. 105–206, title III, § 3201(b), July 22, 1998, 112 Stat. 739.)