Community Income

If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U.S. territory, you can treat your wholly owned, unincorporated business as a sole proprietorship instead of a partnership. Any change in your reporting position will be treated as a conversion of the entity.

Report your income and deductions as follows.

If you choose to treat the business as a sole proprietorship, report all the income and other items from the business on the Schedule C of one spouse.

If you choose to treat the business as a partnership, see Pub. 541 .

If both spouses elected to treat the business as a qualifying joint venture, see Qualified Joint Venture , earlier. States with community property laws include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. See Pub. 555 for more information about community property laws.