transferring income to husband on sch C

[schirallicpa]

Here's a client I wish I had never taken on. A miriad of issues. And here's one of them:

Wife has real estate brokerage license. Husband does the actual selling. NYS only lets commission go to the licensed broker. So she would have a Sch C with - say - $50,000 of commissions offset with a handful of expenses.

But she "pays" her husband. (Oops - no 1099). So they would zero out her Sch C showing fees paid to him. Then he would have his own schedule C, which happens to be offset with other self-employed losses.

Doesn't sound kosher to me. But, then again, I have clients that have schedule C's and have a payroll with their spouse on it. But obviously, in that case, they pay tax. In this case, they are avoidling tax. Not sure why he doesn't have the license.

[Guest Taxed]

Nothing to stop her from paying her husband for "technical consulting" and "other services" rendered to her business

It is NYC Kosher has its own meaning!

[jainen]

>>Wife has real estate brokerage license. Husband does the actual selling<<

Sounds like a partnership with guaranteed payments.

[Guest Taxed]

Husband-Wife partnerships can elect qualified joint venture and still file Sch C instead of 1065.

[jainen]

>>Husband-Wife partnerships can elect qualified joint venture and still file Sch C instead of 1065.<<

Actually TWO Schedule Cs, and that might work except, as I read the original post, the broker does not meet any of the seven requirements for material participation.

[Cathy]

In the "For What It's Worth Department":

In Louisiana and probably other states as well, one MUST be licensed in order to sell real estate. My husband had a salesman's license, and I found quickly I needed to get mine as well. The ONLY information I could legally give to a person calling about a listing (without my license) was to tell him/her when my husband would be available to tell them information in regard to the property they were interested in. Had I even told them whether or not the property was still available for sale, I could have risked my husband's license as well as the broker's license.

Large real estate firms advertise for office employees who hold real estate licenses for certain positions, such as receptionists, etc.. If no such employee is available for a position such as answering the phone, then the licensed agents must come in on a rotating basis to answer the phone.

If a competitor agent realizes that an unlicensed agent is selling insurance and reports such to the Real Estate Licensing Board, I feel sure that unlicensed person's tax returns could be subpoenaed.

[Cathy]

P.S. After re-reading the first post again, I wouldn't touch the return with a ten foot pole....especially since the husband has "losses" that added to the profit from the real estate sales would reduce his social security taxes. Nope! Definitely a client for "Liberty" or "HR".

Also, from the first post: "Not sure why he doesn't have his license." My guess is because he doesn't sell real estate to begin with.

Also, "In this case, they are avoiding taxes." B I N G O

[schirallicpa]

_{I spoke with another client of mine who has a real estate license. He told me that the broker cannot have someone else do their selling. I put them on ext. I will deal with them some other day:)}

_{My secretary keeps telling me to get rid of them too.}

[Cathy]

_{I spoke with another client of mine who has a real estate license. He told me that the broker cannot have someone else do their selling. I put them on ext. I will deal with them some other day:)}

_{My secretary keeps telling me to get rid of them too.}

Very wise secretary! Before I would even begin their return, I'd tell them straight that you researched the real estate law (to protect them), and coupled with the fact that you learned it's illegal for her husband to sell without a license, IRS could fine you and possibly lose your professional license if you show her profit under her husband's name to lower their overall self employment taxes.

You just might be able to make honest people out of them. Doubt it, but maybe!