is there any reason you think you can't file a joint return with your spouse even though she has no income? it makes no difference that you acquired the property before you were married. a married couple can file a joint return but must report all their income on the one return. if you were to file as Married Filing Separate you would end up paying twice the income taxes than on a joint return. economically what you would like to do makes no sense and I agree with others that the IRS wouldn't buy it.
"incorporating and paying a firm (her firm) and she manages the property I can write off the expense reducing my tax owing and then her self employed firm would get taxed at a rate potentially lower than my current tax rate"
say a Corp. it would have to pay her a salary and it probably has to be almost as much as the management fees you paid it - after all you would be paying it for the services it performs and she is performing all the services. Between her and the corp they would pay 15.3 % in social security taxes + unemployment taxes. Since she would be an employee, in most states the corp would have to buy workmen's compensation insurance and if she uses a vehicle possibly higher insurance for that. To play it safe possibly liability insurance. Her salary would be included on your joint return (married filing separate would most like result in much higher combined taxes). the corp would have to pay federal and state income taxes assuming anything is left after expenses. Most states require Corporations to pay franchise taxes. The management fee you paid the corp would have to be reasonable (as I have said I don't think the IRS would buy this as legit which would cause you more tax problems). how much do you really think you could pay her? management duties should only take a few hours per week
