Qualified Join Venture Vs Form 1065 Partnership

1) In a community property state like Texas, Can an LLC be filed as a qualified joint venture ?

yes. as a QJV there is no separate return. everything is reported directly on the applicable forms or schedules for your 1040

    2) What benefits does a qualified joint venture have over a partnership form 1065 if at all ?

with a QJV you each report your share of items - for rental real estate schedule E. no partnership return is filed. so with one rental property, 2 columns on Schedule E are used. one for H and one for W. this requires splitting the cost of the property so each will take their share of depreciation

   3) I read from some sources that we cannot file for our LLC as a qualified joint venture if our main income is passive income such as from rental revenue ? Is that true.

see the material participation rule below, if you meet it you can make the QJV election. if you don't meet the test then a partnership return is required. 

Even if qualified there is no requirement to make the QJV election (checking the QJV box on the form).  in some cases filing a partnership return may be easier. with a QJV the cost of each capital improvement would need to be split. 

If a married couple forms an LLC in a community property state, they can qualify for the Qualified Joint Venture election, as long as they meet the following requirements (as per Revenue Procedure 2002-69):

• The LLC is formed/created in a community property state 
• The married couple are the only LLC owners (there are no other persons or companies that own the LLC) 
• Both spouses materially participate in and operate the business. this is where the passive issue sometimes arises
• The married couple files a joint federal income tax return (Form 1040)
• The LLC has not elected to be taxed as a Corporation under 26 CFR 301.7701-2

each spouse must meet one of the seven following tests:
1. You work 500 hours or more in the activity during the year.
2. You do all, or nearly all, of the work in the activity.
3. You work more than 100 hours in the activity during the year, and no one else works more than you do.
4. The activity is a significant participation activity (SPA), and the sum of the SPAs in which you work 100–500 hours exceeds 500 hours for the year.
5. You materially participated in the activity in any 5 of the previous 10 years.
6. The activity is a personal service activity and you materially participated in that activity in any three prior years.
7. Based on all of the facts and circumstances, you participate in the activity on a regular, continuous, and substantial basis during that year. Note that this test only applies if you work at least 100 hours in the activity, no one else works more hours than you in the activity, and no one else receives compensation for managing the activity.