Rev. Rul. 56-210

Reconsideration has been given by the Internal Revenue Service to the position set forth in Revenue Ruling 54-206, C.B. 1954-1, 94, in the light of various court decision on that issue.

Revenue Ruling 54-206, supra , states the position of the Service to be that, for the purposes of section 107(a) of the Internal Revenue Code of 1939, a husband and wife who reside in a noncommunity property state may not split income which constitutes compensation received by the husband for personal services rendered by him during taxable years beginning prior to January 1, 1948 (the effective date of section 12(d) of the 1939 Code which permitted income-splitting between husbands and wives). All of the following court decisions, however, hold contrary to the position taken in Revenue Ruling 54-206, supra: Hofferbert v. R. E. Lee Marshall et ux. , 200 Fed.(2d) 648; Commissioner v. Ayers J. Stocky et ux. , 221 Fed.(2d) 745; United States v. Arthur B. Koontz et ux. , 223 Fed.(2d) 250; John E. McClure et ux. v. United States , 228 Fed.(2d) 322; Commissioner v. Benjamin Mahler et ux. , 228 Fed.(2d) 903; Leon R. Jillson et ux. v. Commissioner , 22 T.C. 1101, nonacquiescence in part, C.B. 1955-1, 7; William G. Boatright et ux. v. United States , 135 Fed.Supp. 93; Richard B. Barker et ux. v. United States (D.C. Md., 1955, unreported; and Caleb R. Layton, 111, et ux. v. United States (D.C. Del., 1956, unreported).

The position of the Service on this issue as set forth in Revenue Ruling 54-206, supra , has been incorporated in section 1305(c) of the Internal Revenue Code of 1954 and made effective by section 1305(d) of the 1954 Code as to amounts received or accrued after March 1, 1954. Consequently, this issue will only arise in connection with section 107(a) income received on or after January 1, 1948, and before March 1, 1954. However, in view of the court decisions contrary to the position of the Service on this issue, the Service will follow such decisions in those cases in which section 107(a) of the 1939 Code is applicable. Revenue Ruling 54-206, supra , is revoked.

The Service further concedes that, in view of the decisions in Commissioner v. Ayers J. Stockly et ux., supra , and George K. Ford et ux. v. Commissioner , 217 Fed.(2d) 886, the computation under section 107(a) of the 1939 Code may be made on a separate return basis for the years during which section 107(a) income was earned, despite the fact that joint returns may have been filed for the prior years.