Salary/Dividend Split In Texas - Married Filing Separately

[Bryan Hancock]

I am in the process of setting up a new entity in Texas that will replace my old operations entity that I've been using for the last 14 years.  I'm engaged to what will be my 2nd wife after a lengthy and somewhat contentious divorce.  

An attorney is preparing my new operating agreement and for some reasons I would like to keep private we're looking to do a 99/1 split on our income tax returns as married filing separately in Texas.  I visited with my long-time accountant a few weeks ago and he informed me that in Texas for some reason if you file married filing separately you have to report half of your spouse's income on your return.  This is undesirable for our situation so I am trying to understand the mechanics, whether or not this is correct, and if there is a way we can legally avoid doing this.  

To provide more detail here would be the normal scenario for buy/sell (operations) projects going forward:

• Special purpose entity would be formed for each new project that will be developed and sold using my own capital, bank capital, and syndicated capital
• The new development entity we're organizing would specify the 99/1 split of distributions and would act as the manager of each SPE. The entity would be filing a 1120s as a LLC electing to be taxed as an s-corp
• We'd be personally filing as married filing separately

We would like cash to flow like this:

1.  Out of the SPE (tax form would be K1 presumably)

2. In to the LLC's bank account

3. Out of the LLC bank account as a salary/dividend split (tax form would be 1099 presumably)

4.  In to each of our individual bank accounts

5.  Later to a joint bank account (tax form would be 1040 presumably)

What I am seeking is a method that allows 99 parts out of 100 of this income to show on one of the two tax returns.  This would presumably be part salary and part dividend if that part matters for the procedural way it is reported on the returns.  Is there a way to do this?  We could do a private agreement if needed.