For co-owners other than married couples, joint ownership of real estate provides a simple way of splitting income from the property. For example, annual rents are divided among co-owners according to their ownership interest and the allocable share is reported on each one’s separate return.

Transfer of rented property may shift the tax burden on rental income. In order for the shift to be valid, however, the transferor has to give up control of the property and intend that a transfer occur. In Hutcherson, George (1984) TC Memo 1984-165, a taxpayer was taxed on rent paid to his business associates from rental property he owned. He had transferred the property to the associates in order to get it out of the reach of creditors.

Permission to use property is not conveyance of a property interest that transfers tax burden (Helm, Muriel,(1956) 27 TC 270). Note: A taxpayer who switches ownership of income-producing property to joint ownership with a dependent (e.g., to a son or daughter) may lose the dependency exemption. This must be compared to the income tax savings of switching ownership. The transfer is considered a gift that would most likely require filing a gift tax return (Form 709).