A Qualified Joint Venture is an exception to the general rule classifying a joint venture as a partnership for tax purposes.
Generally, a joint venture is an unincorporated business consisting of two or more parties who are working together to conduct a project or transaction. A qualified joint venture, added to the Internal Revenue code by the Small Business and Work Opportunity Tax Act of 2007 and defined in code section 761(f), can elect out of partnership treatment for federal income tax purposes.
A qualified joint venture is a business operated only by a materially participating husband and wife who both elect this special treatment. An LLC cannot elect to be a qualified joint venture.
Making the election eliminates the requirement to file Form 1065. Instead, the business income is allocated between husband and wife using two Schedule C forms included in a joint income tax return. Each spouse receives credit for Medicare coverage and social security earnings, which affects benefits received upon retirement.
The partnership itself is not terminated by making the election. See Revenue Procedure 2002-69 regarding the deemed formation of a partnership each year, and for special rules applicable to husband and wife state law entities in community property states.