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Since it's very difficult to accurately identify the source,

Why is it difficult to identify the source? If it's because the money that went into the account was commingled money from both spouses - perhaps it had run through several other accounts before - then it will almost certainlly be community income from CA's point of view.

can I divide the capital gains in the same ratio as our incomes? Will that be reasonable?

No. Your relative incomes for 2005 have nothing to do with the source of the funds that went into the account. It's either community income or separate income. There's no middle ground here.

If it's community income, it goes 1/2 to each spouse. If it's separate income, it goes to the spouse who owns it. Since you are in a community property state, it's pretty hard for you to have separate income. Not impossible, just hard.

Once again, the legal complexities of one spouse living in a community property state and one not are the overriding issues here. Once you get that sorted out, the tax treatment will become fairly obvious.

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