Being life partners’ means you enjoy, spend fun time together, share bills and all the responsibilities of the house. There are some concerns related to tax that you need to keep in mind if you are business partners as well.
The new law was passed in 2007 that states that if husband and wife are carrying out a joint venture, it won’t be considered a partnership.
What is qualified joint venture?
It is a joint venture involving the conduct of a trade or business, if
- Husband and wife are the only members of the joint venture
- Husband and wife financially participate in the trade equally
- Both spouses elect to have the provision apply
What does the provision state?
The provision states that a joint venture which is conducted by husband and wife will not be treated as partnership for the federal tax purposes. The provision states that all items of business are divided between the spouses in proportion to their interest in the business. The items include:
Each spouse is responsible for their share of items as a sole proprietor.
If any of the spouses has to determine net earnings from self-employment, each spouse’s share of income or loss from a qualified joint venture is taken into account just as it is for Federal income tax purposes under the provision.
This generally does not increase the total tax on the return, but it does give each spouse credit for social security earnings on which retirement benefits are based.