As we explained in a past issue of the Tax Reduction Letter, a spousal partnership can save you a lot of money on taxes. More money, in fact, than a sole partnership or S corporation can.
But some of our readers have asked us if an IRS attribution rule (that applies to spouses who conduct passive activities) kills the spousal partnership strategy.
Our answer is an emphatic “No!” The strategy still works beautifully as we’ll explain when you read my new article titled Tax Tips: Q&A: Does the Spousal Partnership Strategy Really Work?
Three ways our fact-filled article can help you:
- We’ll tell you what you need to know about the self-employment tax. Here are the facts: Having your spouse as the investor in your business lets you claim that your spouse’s portion of the net income is passive. It is not subject to self-employment taxes as we’ll explain when you read the full article.
- You’ll learn the significance of the Section 469 attribution provision. It concerns passive-activity loss-rules that determine whether a taxpayer materially participates in certain activities. If you understand the rules, which do not apply to the self-employment tax, you won’t get in trouble with Uncle Sam. You’ll get all the details when you read the full article.
- We’ll tell you why it can still make sense to create a spousal partnership. Don’t let rules that don’t apply to your situation dissuade you from taking advantage of the benefits a spousal partnership can provide. It can increase tax savings, eliminate the need for payroll and “reasonable compensation” determinations, and reduce your risk of an IRS audit. You’ll get the whole story when you read the full article.