Qualified Joint Venture
If you and your spouse each materially participate (see Material participation under Passive Activity Limits, later) as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax.
If you make this election, you must report rental real estate income on Schedule E (or Schedule C if you provide substantial services). You will not be required to file Form 1065 for any year the election is in effect. Rental real estate income generally is not included in net earnings from self-employment subject to self-employment tax and generally is subject to the passive activity limits.
If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect.
For more information on qualified joint ventures, go to IRS.gov. Enter “qualified joint venture” in the search box and select “Election for Husband and Wife Unincorporated Businesses.”