No that's not quite right. After the spouse complete their business return reporting income and expenses, you would need to split the net income/loss 50/50. According to IRS.gov: you must report your community income and separate income if you file Married Filing Separately.
Community income
- Generally, community income is income from:
- Community property;
- Salaries, wages, and other pay received for the services performed by you, your spouse (or your registered domestic partner), or both during your marriage (or registered domestic partnership) while domiciled in a community property state; and
- Real estate that is treated as community property under the laws of the state where the property is located.
Generally, income from separate property is the separate income of the spouse (or the registered domestic partner) who owns the property. Separate property consists of:
- Property that you or your spouse (or your registered domestic partner) owned separately before your marriage (or registered domestic partnership);
- Money earned while domiciled in a noncommunity property state;
- Property that you or your spouse (or your registered domestic partner) received separately as a gift or inheritance during your marriage (or registered domestic partnership);
- Property that you or your spouse (or your registered domestic partner) bought with separate funds, or acquired in exchange for separate property, during your marriage (or registered domestic partnership);
- Property that you and your spouse (or your registered domestic partner) converted from community property to separate property through an agreement valid under state law; and The part of property bought with separate funds, if part was bought with community funds and part with separate funds.
This may be a little more detail than you have intended to receive but hopefully this information was helpful.
@RpArp
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