David

I appreciate your help. Thanks for clarifying everything.

Thanks for your help. Doesn't the property have to be in the LLC's name in order for the asset, depreciation, rental income/expenses, etc. to be reported on 8825? I thought if rental property was titled in individuals' names then it had to be reported on Sch E with each person's % owenership. Is the reason that the property can be reported on 1065 because the individuals and the H&W set up an LLC with the intention of reporting the property under an LLC? In each case, the TPs main reason for setting up an LLC was to get legal protection. For instance if someone falls and hurts themself will they still get the legal protection? Thanks.

Now this is getting to be ridiculous. I just received information from another client who set up an LLC for rental properties with two other members. However, he says the properties are titled in their individual names due to mortgage company rules. What do others do in this case? I think they have to file on Sch E and dissolve the LLC, don't they? Since no property will be titled to the LLC then they won't get the legal protection even if the members contribute the property to the LLC, will they? Sort of defeats the purpose of forming the LLC, doesn't it? Thanks for your help.

Thanks for your help. The articles of organization for Colorado only ask if there are one or more members. It doesn't list names. So a single or multi-member LLC would check this box. I always thought it was strange to have that question since all LLCs would check the box.

However, they aren't getting the legal protection since the property is in their names, are they? So maybe it is a moot point to have the LLC and file a 1065. Just file 50% ownership on Sch E? Thanks.

I wish clients would talk to me first before doing these real estate deals. I just heard from another client who set up an LLC (2 brothers) in 2015 and purchased property in their name instead of in the LLC's name. They have a mortgage on the property. They just tried to transfer the property to the LLC but the mortgage company won't allow them to transfer the property. I guess the brothers can contribute the property to the LLC in 2015 and file the 1065? Thanks.

Wouldn't 2015 be file on Sch E since it is a H&W property?

I don't think they can file a 1065 for 2015, can they, since the property is in their name and not the LLC? They are planning to transfer title to the LLC now.

Thanks everyone for your help on this. I will double check with them but I think they paid cash and don't have a mortgage on the property. So that makes things a little easier. Regarding my last question - can I simply file an initial and final 2015 zero 1120S and be done with that? Whoever was advising them told them to put the property in an LLC or S Corp so they could take the losses. They are high income so they will have to suspend any losses. As far as I know there is no difference between them reporting the property on a Sch E vs 1065. The losses will still be suspended unless there is other passive income, correct? Thanks.

Since they filed a 2553 and the IRS expects an 1120S to be filed, they should file a zero 1120S tax return for 2015? If the property isn't deeded to the company they set up then can't the 2015 1120S zero tax return be filed as an initial and final tax return? Then they can create an LLC company this year and transfer the property to the LLC. Will this be an acceptable way to handle this situation?

Clients purchased a rental property in 2015 in their personal names. They registered an LLC with the state and IRS and received an EIN. They also filed a 2553 to have the LLC taxed as an S Corp and they received IRS approval. The property is still in their names and they haven't transferred it to the LLC. I just found out about this. I asked them for copies of all the documents they filed with the state and IRS. Is there an easy fix to correct this error and have the entity taxed as an LLC in 2015? Thanks.

H & W business owners filed Sch C for their business in their 2014 tax return. 2014 was the first year for their business. The Sch C listed only the H as the owner. TPs intended to be a partnership and didn't realize the tax return filed for them treated the business as a SMLLC. I am preparing their 2015 tax return. I think I can file a 8832 for them to be taxed as a mulit member LLC retroactively back to 1/1/15. But I don't think they can get late election relief for 2014, their first year in business. Even though the 8832 is being filed within 3 years and 75 days, doesn't the fact that they already filed their 2014 tax return disqualifiy them from being able to amend and file a 1065 for 2014? Has anyone had this situation before? Were you successful getting everything amended and filing a 1065 back to the beginning year of the business? Or can I only file the 1065 for 2015? Also, what usually flies as far as the reason the 8832 wasn't timely filed? Thanks.

Thanks for your PS tips. Keep them coming. :-) We appreciate it.

Thanks for your help with this. I used ATX in 2013 and am preparing a 2014 amended return in ProSeries. Both ATX and ProSeries (PS) have basis worksheets. I did have the materially participated box checked under line 1 of the K-1 input form. I still don't understand why it is reporting the suspended loss allowed in the passive category on Sch E pg 2. Any other ideas? I am looking at this because the client received a letter from the IRS stating that it appeared the client was subject to the AMT and to submit Form 6251. The original 2014 individual tax return did not include the 6251. PS didn't include the 6251 in the return since the PS calculations determined the client wasn't subject to the AMT. The 6251 still doesn't appear in the client's tax return even though I can "add" the form and view it. PS still doesn't include it in the return - it goes away after I close the return. Any ideas on having the 6251 included as part of the return? In print options I selected "if any data". "Always" doesn't appear in the drop down selections. PS still doesn't include it in the return. PS carried forward the 2013 loss carryover from ATX - $162K regular tax and $213K AMT. All the suspended losses (basis limitation) were allowed in 2014 since the S Corp had a profit of $305K. This resulted in a $51K negative amount being shown on line 19 Passive activities of Form 6251. With this entry, there is no AMT. Without it, there would be AMT. I guess the IRS isn't aware of the difference between the regular loss carryover vs. the AMT carryover. If I am going to submit Form 6251 shouldn't it show the $51K negative amount on line 20 Loss limitations instead of the passive activities line? Or does PS know something I don't know? Thanks.

Client has been carrying forward losses that were limited in past years because of basis. He is allowed to take some previously suspended losses. However, the loss is showing up on Sch E pg 2 in the passive category. I can't figure out how to get it in the nonpassive section. Also Form 6251 shows the difference between regular tax and AMT on line 19 Passive acitivities. I don't think this should be classified as a passive activity. Or is it considered a passive loss since it is a basis limitation loss carryforward? If it should be classified as nonpassive, can anyone who is using ProSeries tell me where to go to classify it to nonpassive? Thanks.

I have 2 clients who have RMD problems. The first client is in her 40s and inherited an IRA five or six years ago. She was not aware that she had to take RMDs and the financial institution did not advise her until 2015. Does she have to get caught up for the past years or just start taking the RMD in 2015? Is it necessary to file an explanation to abate the penalty for RMDs not taken in previous years or does she just need to make sure she takes and reports RMDs each year going forward? The second clients are in their late 70s and were taking RMDs since 70 1/2. For some reason no RMDs were pulled out of the accounts by their financial institution in 2015. According to the clients the financial institution always distributed the RMDs to them every year in the past. Is there any penalty relief for these TPs under those circumstances? Thanks.

Thanks for clarifying the joint venture rules. This isn't a community property state so their only choice is to officially add her as a member and file a 1065. Thanks for your help.

The husband was going by the advice given. They maxed out the 2014 401K contributions and are expecting to max out for 2015 and take a $106K deduction. That would have to be a big paycheck for his wife. I am surprised that the double max 401K deduction with only 1 Sch C for 2014 didn't generate a letter from the IRS. Aren't the H & W allowed to choose to file 2 Sch Cs as a joint venture or a 1065? I think the tax result and the 401K deductions would be the same. Thanks.

The spouse does admin and bookkeeping work for the business. If a Sch C is filed for the spouse (joint venture) splitting the revenue and profits 50%, would this qualify for a spousal 401K? Does it matter that the LLC is in the husband's name in order to file the joint venture Sch C? According to the TP, the previous accountant and financial advisor advised that both the TP and spouse are allowed to contribute to the 401K plan. They must know something that I don't know. However, I still don't understand how they could have taken the 401K deductions for both when she wasn't paid from the company nor a separate Sch C was not filed for her as a joint venture. Thanks for your help.

So the link, as well as other resources I've read appear to say that a spouse can be covered under a SMLLC solo 401K plan only if they work in the business and are either paid through payroll or file a Sch C reporting their portion of LLC profit as a joint venture. Since the spouse didn't receive a paycheck and didn't file a Sch C as a joint venture should the 2014 tax return not have reported a 401K deduction for her? I don't see any resource that supports a 401K deduction for a spouse who isn't active in the SMLLC and who isn't subject to the SE tax. I want to make sure my understanding is correct before I tell the client that they can't take the deduction for the spouse on their 2015 tax return. Thanks for your help.

To answer the question, you only file 2553, but you'll have to file it under the rev proc for late elections. It will most likely be approved. I've had to do several late 2553s this year. Ok, thanks for your help. For some reason I thought the 2553 was filed for either C Corps or multi-member LLCs and a SMLLC had to change their classification first by filing the 8832.

I was planning to process an annual payroll check and reclassify distributions to salary by 12/31/15. Then file the 2553 with the tax return. If the actual payroll doesn't get processed by tomorrow, would a relcassification of distributions to salary on Sch C subjecting the salary to SE tax work? I know this isn't as clean, but have others had success with this method? Thanks.

New client has a Solo 401K plan for his SMLLC business. In the past, in addition to the TP, the spouse was allowed to deduct 401K contributions on Form 1040. The spouse is not listed on the Sch C and she isn't paid as an employee. She does work on the company's books. Is there a reg out there that I am not aware of that allows the spouse to also deduct 401K contributions for the SMLLC business? Thanks.

New client filed a 2014 Sch C for his SMLLC. His profits skyrocketed in 2015. Since the TP hasn't paid a salary or anything else that an S Corp TP would do, is the late S election still available to him when he files his 2015 tax return? If the late election is still available does he need to file Form 8832 and Form 2553? Or does he only need to file Form 2553? Thanks for your help.

Thanks for clarifying that. I thought any assets and liabilities included in the asset sale were included on the 4797. So it appears that the only asset categories that will be reported on the 4797 will be the fixed assets, goodwill and intangibles? Thanks.