Qualified Joint Venture

[califnena]

My husband and I qualify as a Qualified Joint Venture (QJV).  I get a W-2 and he is Self-Employed.  Together we own 4 properties that are currently rented out.  We find our own tenants, collect rent and make our own decisions.  We have several questions:

1) How do we tell the IRS we are a QJV?

2) We currently file Schedule E's for each property, Do we need to submit Schedule SE (if we don't file Schedule C) for each one of us to get Social Security Credit? If so, is the rental income to be reported on line 2?   My spouse will have 2 Schedule SEs (one as a landlord and the other as his other duties)?

3) Are we considered passive even though we manage our own rentals and only need to file Schedule Es?

[Anonymous_ · Accepted solution]

You might want to read the information at the following link (IRS web site), carefully, before proceeding with your QJV election (the mechanics of which are typically just checking a box on Schedule E).

https://www.irs.gov/instructions/i1040se#idm140609549106496

Your rentals are still subject to the passive activity loss rules unless you materially participate as a real estate professional.

Further, you would not report rental income on Schedule C unless you were a dealer in real estate or rented on a short-term basis and provided substantial services to your renters (i.e., on the order of a hotel).

[Carl]

1) How do we tell the IRS we are a QJV?

You have to go into forms mode and select the QJV box that way. Then switch back to the step-by-step mode. Note that if you are using the online version of TurboTax, then forms mode is flat out not possible.

2) We currently file Schedule E's for each property, Do we need to submit Schedule SE (if we don't file Schedule C) for each one of us to get Social Security Credit? If so, is the rental income to be reported on line 2? My spouse will have 2 Schedule SEs (one as a landlord and the other as his other duties)?

No. Rental income is passive and therefore not subject to the Self-Employment tax. Additionally, your passive rental income does not count for figuring your maximum contribution allowed to a tax deferred retirement account, or a ROTH retirement account. It also doesn't count for social security or Medicare.

3) Are we considered passive even though we manage our own rentals and only need to file Schedule Es?

If you are not a real estate professional then yes, absolutely. But if you are an RE pro, then it depends on other factors that I won't cover here under the assumption that you are not an RE professional.

[califnena]

Thanks for the response!

Now, will each spouse need to fill out a separate Schedule E for each property?

Do we need to enter the percent ownership in Schedule E?

[Anonymous_]

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@califnena wrote:

Now, will each spouse need to fill out a separate Schedule E for each property?

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No. See https://www.irs.gov/instructions/i1040se#idm140609549106496

To make this election for your rental real estate business, check the "QJV" box on line 2 for each property that is part of the qualified joint venture. You must divide all items of income, gain, loss, deduction, and credit attributable to the rental real estate business between you and your spouse in accordance with your respective interests in the venture. Although you and your spouse will not each file your own Schedule E as part of the qualified joint venture, each of you must report your interest as separate properties on line 1 of Schedule E. On lines 3 through 22 for each separate property interest, you must enter your share of the applicable income, deduction, or loss.