Thanks for all responses. To clarify a little bit - we did not set up the structure in this format. It was done before we begin doing the return. The way it is set up is actually not bad in that the attempt was to safeguard assets as the owner is a multi-millionaire with numerous holdings and business dealings. Without convuluting this conversation further, it was set up as follows: It has a GP up top that is a 1% General Partner of the LP (a husband and wife own 50% respectively of the GP and 49.5% of the LP). The LP owns a 100% member interest in the three separate LLCs. Of course, if we had been involved from the start, we could have recommended some other steps to simplify things (I'm like most of you, I like to keep it efficient, but as simple as possible), but we were not.
Having said that, if my client and his wife owned these single member LLC’s, it would be much easier as we could report them on their personal return. However, since the LP has a 100% member interest in those LLC’s, we have to report all of the LLC’s activity on the LP’s partnership return. This has created somewhat of a matching problem for the IRS because all of the form 1099’s were issued to the LLC’s. The IRS has no way of matching them with the 1065 return. That was the main reason for the intital questions on this topic and why we wanted to get some thoughts as to the suggestion that each of the LLC’s elect to be taxed as a corporation and report on its own. Then we could send the 1120S-K1s to the LP for the LP to report it on the 1065. That way the IRS can match all of the 1099s form to the respective 1120S return. Just a thought that we wanted to get some feedback on as the best way to avoid matching issues in the future.
Thanks
Newbie