Patricia A. Cain (Santa Clara), Taxation of Unmarried Partners, 99 Wash. U. L. Rev. 1931 (2022):

The number of unmarried couples in the United States has been steadily increasing. While living together these partners often make property transfers between each other. And, when the relationship ends, either during their joint lifetimes or at the death of one partner, even more property transfers are likely to occur. Yet, there are no clear tax rules that apply to these transfers. Traditional tax rules typically characterize most of these transfers either as taxable gifts or as taxable income. This article argues that it is time to rethink those rules. Since federal tax law follows state property law to determine tax consequences of property divisions and transfers, the growing body of property law rules that apply to unmarried couples needs to be examined more closely to determine how they might affect certain tax consequences.

This article concludes that sometimes relying on a partner’s claim to property rights that stem from the relationship should result in the non-taxation of the property transfer. The result would be to mirror the results obtained by spouses under Section 1041 of the Internal Revenue Code. In the absence of any tax statutes that apply to unmarried couples, it is up to the Internal Revenue Service to construe existing law, in light of these state property rights, in order to reach this result.