Terry D EA Posted March 18, 2013 Report Share Posted March 18, 2013 Two individuals own a piece of rental property bought for the sole purpose of rental activities. 2012 is the first year this property was placed in service and available for rent. How would I split the depreciation. It is simple enough to split the income and expenses on Schedule E but the depreciation is throwing me a bit. I am of the opinion that these two guys should become a partnership and in doing so, problem solved. Too tired to think. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted March 18, 2013 Report Share Posted March 18, 2013 Why not just split the basis? Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted March 18, 2013 Report Share Posted March 18, 2013 Hey Terry, I am not sure if my example helps you but I have had a bunch of "house flippers" over the last few year. Usually family members or friends pooling their resources to buy sell, rent houses. All of them except the husband/wife teams were on a 1065 form, got a K1 with their share of depreciation, cap gains and ordinary income. I put the husband/wife as a qualified venture, separate sch C. Hid a 50-50 split on every item, income, expense, valuation of assets etc. How else can you do it if there is more than one owner and they are not husband/wife?? Quote Link to comment Share on other sites More sharing options...
imjulier Posted March 18, 2013 Report Share Posted March 18, 2013 Terry- I've done this on Sch E by just using 50% ownership and splitting the basis as someone else suggested. No problems. Julie Quote Link to comment Share on other sites More sharing options...
jasdlm Posted March 18, 2013 Report Share Posted March 18, 2013 How else can you do it if there is more than one owner and they are not husband/wife?? A joint undertaking merely to share expenses is not a partnership. Mere co-ownership of property that is maintained and leased or rented is not a partnership. However, if the co-owners provide services to the tenants, a partnership exists. This is from the instructions to form 1065 (Definitions). I'm actually not sure how it is interpreted by the IRS (i.e. when a co-owned rental property would have to file a 1065 vs splitting income/expenses on Schedule E). I would be really appreciative to hear how this is interpreted by the Feds from those with experience in this area. Terry, I hope you don't mind the slight Hijacking of your thread, but given a separate post this season by Michaelmars, I believe, regarding the Trust/beneficiary issue, I am very curious about this. Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted March 18, 2013 Report Share Posted March 18, 2013 I have split a whole shopping center between two unrelated individuals. The one that is my client also split other properties with other people, each person a different individual. I simply split income, assets, and expenses between them. The client then gave copies of his schedule Es to the affected individuals for them to prepare their taxes. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted March 18, 2013 Report Share Posted March 18, 2013 Services for a rental is if it is a hotel, B&B or such that it falls under Sch. C reporting rather than Sch. E. you can choose to report rentals as a p'ship, but don't have to. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted March 19, 2013 Report Share Posted March 19, 2013 I just put it in at 50%. In my case, the clients are always siblings. Mom and Dad leave the home to them and they rent it out. Tom Hollister, CA Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted March 20, 2013 Author Report Share Posted March 20, 2013 Thanks for all the replies on this but I am hanging with jasdlm for now. I have alot of work to do for this client so a little more research won't hurt. Quote Link to comment Share on other sites More sharing options...
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