REVISIT LLC RENTAL

[MOBEE]

Knowing that we discussed husband and wife in rental only LLC and reporting income and expense on schedule E.  Which would be proper -  reporting each rental unit per column on schedule E like you would if there were no LLC - or reporting all numbers combined under LLC name in one column?

[joanmcq]

Doesn't having them in an LLC disqualify them for Sch. E treatment?

if not, I would not report in one column. Each rental has it's own passive losses.  If you elect to group them, the losses can't be realized until all are sold. 

[mircpa]

If there are multiple rental units under same LLC, you would repeat LLC's details in each column  and include property so that at time of sale  it is easier to close each property.

[Lion EA]

MMLLC would file Form 1065.  (Don't know about community property state.)  SMLLC is disregarded as a separate entity unless it elects corporate taxation, so files Schedule E as if not LLC existed.

[Terry D EA]

This topic has been hashed around quite a bit lately. The advice you have been given you should follow. If this is a multiple member LLC then form 1065 is used with rentals being reported on form 8825. Joan is correct. Use separate columns and don't lump them together. Lion is correct as well regarding the treatment for different entities.

[jklcpa]

Use one column for each of them.

FTR, it was the OP that started the original discussion a couple of weeks ago by posting this topic about the rental owned by H-W LLC.

My post from that topic said:

Determining whether or not a husband-wife LLC is a disregarded entity is a matter of state law. If the LLC is formed in a state that is NOT a community property state, the LLC defaults to a partnership unless an election is made to be treated as a corporation.

The exception is where the LLC is set up in a community property state and meets the exceptions in Rev Proc 2002-69.  If it meets the criteria, it is considered a "qualified entity" and may be treated as a disregarded entity for federal tax purposes.  The IRS will accept this position for federal tax purposes. Likewise, LLC may file as a partnership for federal tax purposes and the IRS will accept that position also.  Consistency in filing from year to year is key, otherwise a change in filing is considered a conversion of the entity.

The requirements under 2002-69 for the LLC to be a "qualified entity" are:

• The business entity is wholly owned by a husband and wife as community property under the laws of a state, a foreign country, or a possession of the United States;
• No person other than one or both spouses would be considered an owner for federal tax purposes; and
• The business entity is not treated as a corporation under the applicable Treasury Regulations.

 

None of the above addresses state reporting. Please check your state's law to verify that filing as a disregarded entity is acceptable.

[michaelmars]

lets not ignore the elephant in the room, why would multiple rentals be in the same LLC. Defeats the whole purpose.  A slip and fall in one property buts all of them dangling before the lawyers.  The best advise you can give them it to split them off to separate llc's.  This is a non-taxable event.

[jklcpa]

Agree. I read the OP's post as having one rental owned by H-W, and asking how to report it on Sch E, assuming that this client is in a community property state.