The Spousal Qualified Joint Venture as a Planning Tool
The Small Business and Work Opportunity Act of 2007 (Act) included a provision that allows some husband-wife business ventures to elect out of the partnership rules for federal tax purposes as a qualified joint venture (QJV). While the election will ease the tax reporting requirements for husband-wife joint ventures that can take advantage of the election, the Act also makes an important change to I.R.C. §1402 as applied to rental real estate activities that can lay a trap for the unwary. Thus, it is important to consider the situations in which a QJV election may be a good planning move, and when the election should be avoided.
Also, a recent Tax Court case has shed additional light on whether a farm taxpayer can satisfy the USDA’s active engagement test for payment limitation purposes without being engaged in the trade or business of farming for self-employment tax purposes. That rationale of that case also has implications concerning the use of the QJV election in spousal situations.
The Center for Agricultural Law and Taxation does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. The Center's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.