Business & farm

We have responses on here that are not correct and are misleading:

• Community property state laws may vary and at this point we have no idea how the LLC was formed
  • It could be formed as John and Mary 100% owners / members
  • It could be formed as John 50% and Mary 50% owner / member
• The facts indicate that you "functionally" do everything
  • This is a big factor in how the return is completed
  • Take a look at the Schedule C instructions page C-3 under Community Property.
  • "If only one spouse participates in the business, all of the income from that business is the self-employment earnings of the spouse who carried on the business."  This is essentially what you are stating.
  • See the instructions for Schedule C page C-3 if you are NOT functionally doing everything.
• Revenue Procedure 2002-69 states "If a qualified entity (as described in section 3.02 of this revenue procedure), and the husband and wife as community property owners, treat the entity as a disregarded entity for federal tax purposes, the Internal Revenue Service will accept the position that the entity is a disregarded entity for federal tax purposes."
  • This is essentially how you are treating this regardless of how many Schedule C's you may be preparing for this disregarded entity.
  • This means that if you are functionally doing everything, since this is in a community property state and the LLC is jointly held, this LLC can be treated as a single member LLC (SMLLC); one Schedule C.
• You should meet with a tax professional since there are too many unanswered questions that have short- term and long-term tax and nontax implications.