The community property system has always been a thorn in the side of the federal tax structure. The theory that husband and wife have equal, vested, undivided one-half interests in property held by them as tenants in community, when given effect for federal tax purposes, has resulted, because of our system of graduated rates, in substantial income, estate and gift tax advantages in favor of residents of community property states over their neighbors in non-community property states. Attempts to change this situation as to federal income taxation proved uniformly unsuccessful. However, success was achieved in the field of federal estate and gift taxation by the Revenue Act of 1942. Section 402 (b) of the Revenue Act of 1942, effective October 22, 1942, added a provision to the estate tax law which required that all property held as community property be included in the gross estate of the deceased spouse unless derived from income for services or from the separate property of the surviving spouse, and provided further that in all cases the value of that portion of community property over which the decedent had a testamentary power of disposition was to be included in the decedent's gross estate. Section 453 of the Revenue Act of I942, effective January 1, 1943, provided that all gifts of community property were to be considered gifts of the husband, except to the extent that it could be shown that the property donated was derived from amounts received by the wife as compensation for personal services or from her separate property.
Milton D. Solomon,
THE REVENUE ACT OF 1948-: FEDERAL ESTATE AND GIFT TAXATION,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol47/iss2/2