[wgh11]

My wife and I have been married for eight years and have always filed married/jointly (and lived in the same state - currently CA). In August 2010, I will move to CT to begin graduate school, but she will remain in CA to finish her own graduate school program. Thus, for our 2010 federal return we plan to file married/separately, with separate 2010 state returns (me: part year CA, part year CT; her: full year CA).

We don't own a house and have no children, but we have a joint bank account, joint (JTWROS) savings account, and a joint investment account (also JTWROS). We realized some capital gains prior to the end of July 2010 and we expect to realize some more (either losses or gains, not sure yet) between August and December 2010. CA is a community property state; CT is not.

My questions are:
1. Do we need to have separate bank/savings/investment accounts, in order to file separately?

2. If the answer to #1 is No, then how do we determine how much capital gain income (or capital loss) is attributable to each of us for the August-December 2010 period? (Can we just divide by 2?)

3. I don't think my wife needs to file a CT non-resident return - for state taxes, she will only file a CA return. Is this correct?

Thank you very much!

[MukatA]

You can file joint return for federal as well for the states.

For CT you are part year resident and will report income earned while in CT. Your spouse is nonresident and does not have any CT income.

For CA both of you are residents for 2010 and both will report worldwide incomes for the year. Then on CA tax return you will claim credit for taxes paid to CT.

[ebaines]

wgh11 - I would offer a different solution. For 2010 you can file as a CA resident, and not worry about filing in CT (since you will be in CT less than 183 days) unless you have CT source income. If you do have CT source income in 2010, you file in CT as a non-resident for 2010. For 2011 you will be a CT resident (as you will be in CT more than 183 days) but you can file in CT as married filing separately, even though you file federal taxes as joint. See: DRS: Nonresidents with Connecticut Source Income

As for allocating capital gains when you have a joint account and file separately - -first consider who provided the funds for the investment. If one party provided the initial capital, then that person should report the gain. Or if you have records that show one supplied say 1/3 of the funds and the other 2/3, then you split the capital gains accordingly. But if it's impossible to track back to figure out who supplied the original investment funds, I would suggest that you split 50-50, and provide a worksheet that shows how you allocated the gains between CT and CA.