I usually use method #3. Report the the larger 1099 income on one Schedule C (report it as General Income), then as an "Other Deduction" (I label it as "QJV: Allocated to Spouse"), enter the adjustment amount. On the other Schedule C, report 50% of the income.
For example, let's say there is a total of $50,000 of Gross Business Income, and there are $30,000 of 1099s in one spouse's name. For that spouse, I would report $30,000 of income, then a deduction/adjustment of $5000 (plus 50% of all of the 'real' deductions). For the other spouse, I would report $25,000 of income (and 50% of all of the 'real' deductions).
