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Qualified joint venture: QBI and other questions

Hi, 
I setup a new LLC as a Qualified Joint Venture in a community property state and proceeded to file two Schedule C in turbotax.  

So I now have two Schedule C with two different descriptions  ("Principal business or profession") for the same business name.  So far so good..  I just named one description X-1 and another X-2 with same business name: X

It now asks about QBI information.  I don't have any income and just some minimal expenses (like license fee).  Should I elect these two Schedule C as QBI?  It sounds from Turbotax that most businesses are QBIs..  So I just selected "Yes".

The most confusing part is about "Should X-1/X-2 be treated as part of a combined business?" as part of QBI worksheet.  They aren't exactly a combined business, they are a single Qualified Joint Venture (same business with name "X").  I am at a loss on what to fill out here..  

The exact question is:

This business is part of the following activity:

- X (name of my business)

- This business is independent of any other activities

I also have Turbotax Premier.  Can it handle Qualified Joint Ventures or should i need to upgrade to Home & Business?  Do I need to file Schedule SE today/in the future?  I don't have any income this year but when is it considered self-employment income? any income from business is self-employment income?

finally this is suppose to be an Airbnb rental business (but we never tried to rent it).  Airbnb can be Schedule C or Schedule E.  Does it conflict with Qualified Joint Venture in any way in the future especially if we consider Schedule E?  How do I choose whether to use Schedule C or E in the future?


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2 Replies
KrisD15
Expert Alumni

Qualified joint venture: QBI and other questions

Since you live in a Community Property State, the only reason I can think of for setting up a Qualified Joint Venture would be to fund both Social Security Accounts. 

Social Security Accounts are funded by FICA taxes. 

FICA Taxes are withheld and paid through the Employer for W-2 Employees and through Self-Employment taxes on the Individual Tax Return for the Self-Employed Taxpayer. 

Schedule C income is EARNED INCOME and generates Self-Employment tax (which funds your Social Security Account) 

Schedule E is PASSIVE INCOME. It does not generate Self-Employment tax, does not increase your Social Security Account nor add to earnings that your Social Security payment (when you start to draw) is based on. 

 

 

If you PATICIPATE in the Airbnb, it would be a business (Schedule C) and COULD generate a loss. 

If you hire a management company to deal with the day-to-day tasks of the Airbnb, it is a rental (Schedule E) and losses can only be claimed against the rental (or other passive) income. Passive loss can be carried over year to year. You would not be able to claim any rental expenses until the rental is AVAILABLE for rent. 

 

Qualified Business Income (QBI) is a deduction that allows 20% of the profit to bypass tax.  

There are certain businesses that do not qualify for the QBI. 

Passive Rentals do not qualify. 

A business which offers lodging DOES qualify. 

 

If you are running a Joint Qualifying Venture as two schedule C's and they provide lodging, yes, you can combine them for the QBI, but if there is no profit, there is no QBI. 

 

 

 

 

 

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Qualified joint venture: QBI and other questions

Thank you.

Since you live in a Community Property State, the only reason I can think of for setting up a Qualified Joint Venture would be to fund both Social Security Accounts. 

I want to do Qualified Joint Venture instead of a partnership so I don't have to file 1065 which is extra work.  I just want to make sure I am doing everything in turbo tax Premier correctly

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