Revenue Procedure 2002-69 does provide an exception that allows a husband-wife LLC to be treated as a disregard entity in a community property state @Victor21.
The procedure allows you to treat an LLC owned by a husband and wife in a community property state as either a disregarded entity OR a partnership.
.01 If a qualified entity...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.
.02 If a qualified entity...and the husband and wife as community property owners, treat the entity as a partnership for federal tax purposes and file the appropriate partnership returns, the Internal Revenue Service will accept the position that the entity is a partnership for federal tax purposes.
If you choose to report your rental as a disregarded entity on Schedule E, then you do not have to file a partnership return or issue Schedule K-1.
You do have to file a California Form 568 and pay your annual $800 fee.
See Single member LLC
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