! spouses as co-owners (and not in the name of a state

CAUTION law entity) qualify for the election. Thus, a business

owned and operated by spouses through an LLC does not qualify for the election of a qualified joint venture.

Making the election. To make this election, divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse based on your respective interests in the business. Each of you must file a separate Schedule C or F (Form 1040). Enter your share of the applicable income, deduction, or (loss) on the appropriate lines of your separate Schedule C or F (Form 1040). Each of you may also need to file a separate Schedule SE (Form 1040) to pay self-employment tax. If the business was taxed as a partnership before you made the election, the partnership will be treated as terminating at the end of the preceding tax year. For information on how to report the termination of the partnership, see Pub. 541 .

Revoking the election. The election can be revoked only with the permission of the IRS. However, the election remains in effect only for as long as you and your spouse continue to meet the requirements to make the election. If you and your spouse fail to meet the requirements for any year, you will need to make a new election to be treated as a qualified joint venture in any future year.

Employer identification number (EIN). You and your spouse do not need to obtain an EIN to make the election. But you may need an EIN to file other returns, such as employment or excise tax returns. To apply for an EIN, see the Instructions for Form SS-4 or go to IRS.gov/EIN .

Rental real estate business. If you and your spouse make the election for your rental real estate business, you must each report your share of income and deductions on Schedule E (Form 1040). Rental real estate income is not generally included in net earnings from self-employment subject to self-employment tax and is generally subject to the passive loss limitation rules. Electing qualified joint venture status does not alter the application of the self-employment tax or the passive loss limitation rules.

More information. For more information on qualified joint ventures, go to IRS.gov/QJV .

Community Income If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U.S. territory, you can treat your wholly owned, unincorporated business as a sole proprietorship instead of a partnership. Any change in your reporting position will be treated as a conversion of the entity.

Report your income and deductions as follows.

• If you choose to treat the business as a sole proprietorship, report all the income and other items from the business on the Schedule C of one spouse.

• If you choose to treat the business as a partnership, see Pub. 541 .

• If both spouses elected to treat the business as a qualifying joint venture, see Qualified Joint Venture , earlier.

States with community property laws include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas,

Washington, and Wisconsin. See Pub. 555 for more information about community property laws.

Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction in which you participated. Form 8886 must be filed for each tax year that your federal income tax liability is affected by your participation in the transaction. You may have to pay a penalty if you are required to file Form 8886 but don’t do so. You may also have to pay interest and penalties on any reportable transaction understatements. The following are reportable transactions.

• Certain transactions of interest entered into that are the same or substantially similar to one of the types of transactions that the IRS has identified by published guidance as a transaction of interest.

See the Instructions for Form 8886 for more details. See also chapter 2 of Pub. 550 .

Capital Construction Fund Do not claim on Schedule C the deduction for amounts contributed to a capital construction fund set up under chapter 535 of title 46 of the United States Code. Instead, reduce the amount you would otherwise enter on Form 1040 or 1040-SR, line 15, by the amount of the deduction. Next to line 15, enter “CCF” and the amount of the deduction. For details, see Pub. 595 .

Additional Information See Pub. 334 for more information for small businesses.