Updated July 29, 2026. Quick answer: Six states have enacted them and three of those statutes expressly declare the trust qualifies under IRC §1014(b)(6). But a state statute does not bind the IRS — and there is no IRS ruling, no regulation and no case law testing the question. The only Supreme Court authority on whether an elective community counts for federal tax purposes went against the taxpayer.
What the states did
| State | Mechanism | Statute claims §1014(b)(6)? |
|---|---|---|
| Alaska | Agreement or trust | No |
| Tennessee | Trust only | No |
| South Dakota | Trust only | Yes |
| Kentucky | Trust only | No — but see below |
| Florida | Trust only | Yes |
| Kansas | Trust only | Yes |
Florida’s statute is representative of the confident ones: “For purposes of the application of s. 1014(b)(6) of the Internal Revenue Code … a community property trust is considered a trust established under the community property laws of the state.” That is a state legislature asserting a federal tax result.
The adverse authority, and it is the Supreme Court. In Commissioner v. Harmon, 323 U.S. 44 (1944), the Court held that Oklahoma’s elective community property system was not recognised for federal tax purposes, reasoning that “a consensual community arises out of contract” and that the system was “not a system, dictated by State policy, as an incident of matrimony.” The IRS’s own Internal Revenue Manual says the decision “should also apply to all elective community property systems.” And Publication 555 states expressly that it “doesn’t address the federal tax treatment” of property under these elections.
The honest state of the question
It is genuinely open, and both extremes are wrong. Harmon was an income-splitting case decided before §1014(b)(6) existed, the IRS manual’s sentence is confined to income reporting, and the regulation supplies no definition of “community property laws of any State.” So nobody has actually tested basis. But the only authority pointing anywhere points against, and the agency has said in writing that it thinks the reasoning carries over. Anyone selling you one of these as settled is overstating it.
The tell that one legislature saw the problem
Kentucky put no federal recital in its trust act. It instead amended its state income tax statute to disregard the basis change on the survivor’s share — a legislature acknowledging the federal step-up in its revenue code rather than claiming it in its trust code. That is a more careful drafting choice than the confident version, and it is worth noticing.
Sources
IRC §1014(a), (b)(6), (c) and (e); Treas. Reg. §1.1014-1(a) and §1.1014-2(a)(5); IRC §2040(b); IRC §691. State law as cited on each page from the state’s own codified statutes. The nine-state list is attributed to IRS Internal Revenue Manual 25.18.1.2.3 and Publication 555 rather than to fifty separate statutes. All read July 2026.
This states what the cited authority says. It is not tax advice, and retirement-plan design turns on facts about your business and your other entities that no page can see. Every dollar limit referenced here is indexed and changes annually.