Qualified Joint Venture

[Mizael Quinones]

Hello, BP

My wife and I decided to place our then primary residence for rent in Nov/Dec '19. Its our only rental property. We did not file for LLC or anything like that. Is it necessary to file under qualified joint venture? Any tax benefits? We both have regular full time jobs. We're in Texas.

Just want to make sure I understand before I tell uncle sam

Thanks

[Mizael Quinones]

Originally posted by @Ashish Acharya:

Originally posted by @Mizael Quinones:

Hello, BP

My wife and I decided to place our then primary residence for rent in Nov/Dec '19. Its our only rental property. We did not file for LLC or anything like that. Is it necessary to file under qualified joint venture? Any tax benefits? We both have regular full time jobs. We're in Texas.

Just want to make sure I understand before I tell uncle sam

Thanks

 You don’t have to treat your venture as QJV. You are in the community law state. 

You can treat the venture as a disregarded entity.

PerRev. Proc. 2002-69 and 2002 C.B. 831, a husband and wife who are the sole owners of an LLC and reside in a community property state can choose whether they are treated as a partnership or disregarded entity. In either case, since the husband and wife are joint owners of the LLC, tax information related to the LLC can be discussed with either spouse.

Where spouses are the only owners of an unincorporated business entity and hold their interests as community property under state law, they may choose between partnership or DE status. The community property exception does not

1. require that the operations rise to the level of a trade or business or
2. that either spouse materially participate in the operations.

It also applies if the spouses establish a separate entity such as a limited liability company (LLC).

In community state, husband/wife LLC can own Primary residence and elect to be classified as DE, and qualify for section 121

@Ashish Acharya, greatly appreciate the detailed response! Gives me a huge piece of mind moving forward. Thank you greatly for your time in creating that response.