Ezel / IRS Rulings / 201402004
Chief Counsel Advice 201402004 Released January 10, 2014 Advice

Qualified joint ventures and Schedule C reporting

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This page covers one taxpayer's ruling from 2014, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2014
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

The Chief Counsel advice considers how a business jointly owned by a married couple should be reported for federal tax purposes. It states that the business would generally be treated as a partnership, but a husband and wife filing a joint return may elect qualified-joint-venture treatment for tax years beginning after December 31, 2006. Under that election, each spouse reports the spouse's share on a separate Schedule C and may receive Social Security credit. The advice also states that FICA would be owed only if one spouse were the employee of the other, and then only on the employee spouse's wages.

Ruling snapshot

  • Question: May a married couple jointly operate an unincorporated business without partnership treatment, and when would FICA apply?
  • Outcome: Advice given
  • Key authorities: IRC § 1402; Small Business and Work Opportunity Tax Act of 2007, Public Law 110-28

Full text (IRS public release)

ID: CCA_2013042510110132
Office: --------------
UILC: 1402.00-00
Number: 201402004
Release Date: 1/10/2014
From: -------------------
Sent: Thursday, April 25, 2013 10:11:10 AM
To: -------------------------------------
Cc: ----------------
Subject: RE: ET advice requested by Exam ----------------------

Interesting case. I agree with your instinct that the business income should have been reported on a
Schedule C. You ask whether a Schedule C can be jointly operated. An unincorporated business jointly
owned by a married couple is generally classified as a partnership for federal tax purposes. However, for
tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007
(Public Law 110-28) provides that a "qualified joint venture", whose only members are a husband and a
wife filing a joint return, can elect NOT to be treated as a partnership for Federal tax purposes.
Both spouses can still get social security credit if they elect for the business to be treated as a qualified
joint venture. Spouses make the election on a jointly filed Form 1040 by dividing all items of income,
gain, loss, deduction, and credit between them in accordance with each spouse's respective interest in
the joint venture, and each spouse filing with the Form 1040 a separate Schedule C. The taxpayers
probably should have done this. I agree that the only way they would owe FICA is if one spouse is the
employee of the other spouse, and then only the employee spouse's wages would be subject to FICA.

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