My wife and I have interest in a general partnership between the two of us and we live in a community property state. She does most of the work so I would like to make the distributive shares reflect that. There are some questions I have, however.
- Would the IRS challenge a potential 90-10 or 80-20 split by viewing it as not being economically substantial or having economic effect under 704 1(b)(2)?
- Is it more sound to properly compensate my wife with a guaranteed payment?
- IRS publication 555 for community income laws says "If both spouses are partners, any self-employment tax is allocated based on their distributive shares." Does this confirm my understanding that for the purposes of calculating self employment taxes I would not be forced to take a 50% interest in the partnership?
For the next year I'm thinking about incorporating but I'm struggling a bit for 2016