Discussion:Husband/wife LLC as partnership
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> Husband/wife LLC as partnership
| 8 January 2007 | |
| While reading another thread (Rental Property in single member LLC), I was reminded of an issue I ran across last year, that I couldn’t find an adequate answer.
Facts: Husband and wife in a community property state. Turn wife’s sole prop business (filed schedule C in prior year) into an LLC, with husband and wife as 50/50 members. Wife runs business 100 %. Husband is employed elsewhere and does not participate in the business. The couple elected to file a partnership return for the LLC as allowed by Rev Proc 2002-69.
In doing this the couples self employment tax from the wife’s business was cut in half as follows: Wife got her 50% share of the income on a K-1 from Pshp, which was subject to Self employment tax. The husband got the other half of the income on a K1 from the Pshp, but because he was maxed out on FICA from his W-2 job he paid no self employment tax on his 50% share. Question: Is there anything wrong with this? Seems to good to be true. Regards | |
| 8 January 2007 | |
| Your situation is a little different than mine. My clients(Husband and Wife) both work and run a LLC home construction company here in LOUISIANA(community prop st). I have always filed one Sch C with both as owners and split the SE, and IRS has never questioned it. | |
| January 9, 2007 | |
| This strategy works - see Sec. 1402(a)(5)(B), which provides that a partner's share of SE income from a business carried on by a partnership in a community property state is treated as SE income of the partner and shall not be considered SE income of the spouse of the partner; accordingly, if both spouses are partners in an equal partnership they split the SE income equally. | |
Www.cpa1.biz (talk|edits) said: | 9 January 2007 |
| If one of the spouses is considered a limited partner b/c the wife spends 100% time on the property then the husband does not have to pay S/E tax on his share of the distribution income. Only the wife has to. | |
| 9 January 2007 | |
| Wamark, who are you? Can you fill out a profile for us? Thanks. | |
| 7 February 2007 | |
| So I can file a Schedule C?
My client's are husband/wife LLC. They both work in their business and they take guaranteed payments as well as a few draws here and there. I just talked with their attorney who said they are set up as a two-member LLC with 50% each in the business. I am getting ready to do a 1065 with each having a K-1. Can I file a shedule C instead? Thanks! | |
| 19 October 2008 | |
| Kevinh5, according to the instructions for form SS-4, in a community property state, the LLC can elect to be treated as a disregarded entity (hence triggering the schedule C, correct?). See "Instructions for SS-4," page 3, second column, second paragraph. | |
| 19 October 2008 | |
| If the LLC interests are held as community property, then the coule may elect to file 2 separate Schedule C's. | |
| 19 October 2008 | |
| how about the qualified joint venture of a husband and wife multimember LLC how do they file and what happens to the expected 1065 the irs is expecting?
Neil | |
| 19 October 2008 | |
| Neil, there is considerable discussion on TA about QJV and HW LLCs. Riley and I had a conversation about a week ago. Have you searched? | |
| 20 October 2008 | |
| The IRS has an article on their website indicating that a state law entity may not file a QJV election. I think the author of the article is confusing a 761(a) election with a 761(f) election. | |
