Qualified Joint Ventures

The Small Business Act of 2007 added IRC Sec. 761(f) permitting spousal qualified joint ventures (“QJVs”). A QJV is not treated as a partnership for federal tax purposes. If a husband and wife thus own a rental property in an LLC 50/50 they can avoid filing a partnership tax return. Each is instead treated as owning a proprietorship and files tax returns accordingly. Making a QJV election won’t cause self-employment (SE) tax on income from rental real estate that would otherwise not be subject to SE tax. The IRS reasoned that the purpose of a QJV was not to characterize income as subject to SE tax that would not otherwise have been. CCA 200816030.