Legal Question in Tax Law in Arizona

If you were married during 2010, the default position is that you owned a 50% in the property, in this case profits, under community property laws. Income from a flow through entity (which I am assuming the entity is) must be reported on the owners personal income tax returns regardless of whether there was a distribution. The income that must be apportioned is split in accordance with the partnership (or sub-chapter S corporation) agreement. If an agreement does not exist, income will be apportioned according to each persons' partnership interest.

If you were not an owner of the business during 2010 and did not receive any money or property from the business, you should contact the IRS (yourself or through a tax professional) to make them aware of this. Even if you had an ownership interest, you may be entitled to "innocent spouse" relief if you were not aware of the income. A qualified tax attorney will be able to assist you with making this determination and helping you through the process.