topic in Business & farm

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QandA1 — Wed, 11 Feb 2026 07:03:22 GMT

Re: Joint Ownership of LLC by Spouse in Community Property States

Anonymous_ — Fri, 01 Mar 2024 15:05:50 GMT

If you're holding the property as community property, then the Rev. Pro. is applicable notwithstanding the fact that the property is located in a common law state.

Your actual interest in the LLC (membership) is personal property; the LLC is the entity that owns real estate.

QandA1 — Sun, 03 Mar 2024 07:46:29 GMT

Re: Joint Ownership of LLC by Spouse in Community Property States

Anonymous_ — Fri, 01 Mar 2024 15:36:58 GMT

Not sure why not:

Section 4, .03 reads:
.03 A change in reporting position will be treated for federal tax purposes as a conversion of the entity.

QandA1 — Sun, 03 Mar 2024 07:46:51 GMT

Re: Joint Ownership of LLC by Spouse in Community Property States

KrisD15 — Fri, 01 Mar 2024 16:00:22 GMT

Correct.

According to the IRS:

Section 301.7701-3(b)(1) provides that, unless the entity elects otherwise, a domestic eligible entity is (i) a partnership if it has two or more members; or (ii) disregarded as an entity separate from its owner if it has a single owner.

Section 301.7701-3(c)(1)(i) provides that, except as provided in § 301.7701-3(c)(1)(iv) and (v), an eligible entity may elect to be classified other than as provided under § 301.7701-3(b), or to change its classification, by filing Form 8832, Entity Classification Election, with the service center designated on Form 8832.

Section 301.7701-3(c)(1)(iii) provides that an election made under § 301.7701-3(c)(1)(i) will be effective on the date specified by the entity on the Form 8832 or on the date filed if no date is specified on the election form. The effective date specified on Form 8832 cannot be more than 75 days prior to the date on which the election is filed and cannot be more than 12 months after the date on which the election is filed.

Also, to clarify, since you live in Washington and the rental is in Florida, is the LLC a management company with employees or the short-term rental property?

It seems like it would be difficult to meet the requirement of materially participating as a Qualified Joint Venture compared to an LLC filing as a Partnership.

Additionally, filing as a Qualified Joint Venture does not change much from filing as a Partnership. Qualified Joint Ventures are usually chosen for the advantage of each spouse claiming half the FICA which each Partner does for the income reported by the Partnership.

What do you see as the reason to change reporting?

QandA1 — Sun, 03 Mar 2024 07:47:10 GMT

Re: Joint Ownership of LLC by Spouse in Community Property States

Anonymous_ — Fri, 01 Mar 2024 16:26:45 GMT

You don't have to do anything because of the Rev. Proc. (treat it the way you want, LLC or disregarded).

There is no need to file an 8832.

Furthermore, the property should be reported on Schedule E (1040) or Form 8825 (1065) unless you are a real estate dealer or provide significant services to the renters.

QandA1 — Sun, 03 Mar 2024 07:47:34 GMT

Re: Joint Ownership of LLC by Spouse in Community Property States

Anonymous_ — Fri, 01 Mar 2024 17:53:28 GMT

@QandA1 wrote:
...........so it would be allowed to treated as a business right?

No, not for the purposes of reporting on Schedule C.

You would still report on Schedule E but any net loss would be nonpassive.

QandA1 — Sun, 03 Mar 2024 07:47:52 GMT

Re: Joint Ownership of LLC by Spouse in Community Property States

Anonymous_ — Fri, 01 Mar 2024 18:01:26 GMT

@QandA1 wrote:

But sch E with none passive has a limit on loss of 25$k

No, there is no limit for material participation.

The $25k limit is for active participation (different standard).

QandA1 — Sun, 03 Mar 2024 07:48:14 GMT

Re: Joint Ownership of LLC by Spouse in Community Property States

Anonymous_ — Fri, 01 Mar 2024 18:46:09 GMT

@QandA1 wrote:

that’s not true there is a specific law that disallows material participation test to be used for rentals unless they meet the real estate professional test also.

If you materially participate in your rentals as a real estate professional, then any loss is nonpassive per Section 469. The average period of "customer use" is not a factor.

There are some people, including tax professionals, who ascribe to the notion that short-terms rentals combined with material participation also results in the activity being treated as nonpassive.

I'm going to page @AmeliesUncle at this point. Stay tuned.

QandA1 — Sun, 03 Mar 2024 07:49:04 GMT

Re: Joint Ownership of LLC by Spouse in Community Property States

Anonymous_ — Fri, 01 Mar 2024 19:25:36 GMT

The regulation that is applicable here simply takes the rental out of the passive activity loss rules; it does NOT put the rental into the active business/self-employed classification (i.e., Schedule C reporting).

Again, real estate dealers and those who provide significant services to renters are the only taxpayers who report on Schedule C (or otherwise report as would a typical business enterprise).

QandA1 — Sun, 03 Mar 2024 07:50:29 GMT

Re: Joint Ownership of LLC by Spouse in Community Property States

Anonymous_ — Fri, 01 Mar 2024 19:36:20 GMT

@QandA1 wrote:
So can I amend to report it on the 1040 instead?

It appears from the Rev. Proc. that doing so would be allowed, yes.

QandA1 — Sun, 03 Mar 2024 07:50:58 GMT

QandA1 — Sun, 03 Mar 2024 07:51:48 GMT