Rental Prop in an LLC

[imjulier]

Have a H&W who jointly own several rental properties and have them all in seperate LLCs. I have elected to treat them as a QJV and report on Sch E. Their income is above $300K. Would the same $ limitation on deducting rental losses apply if filed on a 1065? I think it would but I can't seem to find that anywhere.

Thanks. Happy Sunday!

Julie

[imjulier]

Ah, found it in instructions to Sch E....no change in passive loss limitation rules. Let me know if you would interpet this differently.

Julie

[jainen]

>>I have elected to treat them as a QJV and report on Sch E<<

According to this IRS fact sheet about qualified joint venture, http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Election-for-Husband-and-Wife-Unincorporated-Businesses. "A business owned and operated by the spouses through a limited liability company does not qualify for the election. Only businesses that are owned and operated by spouses as co-owners (and not in the name of a state law entity) qualify for the election."

In my opinion, this Colorado couple is required to file a separate partnership or corporation return for EACH property.

[imjulier]

I had not seen that before. Thanks for the information Jainen!

Julie

[OldJack]

I agree with Jainen.

[jainen]

>>I had not seen that before<<

Now, I COULD do it for my own clients because I live in a community property state. But I still wouldn't anyway--the reason they set up separate limited liability companies was to separately limit liability, right? I hope that thought will help you explain that tax preparation this year will cost them upwards of $2000.

[OldJack]

>>will cost them upwards of $2000<<

LOL

[jainen]

>>LOL<<

I'm not laughing. There's at least three business entity returns with depreciation schedules, If S-corps or partnerships, that's six k-1's which presumably get charged to the entity and again to the individual 1040. Apparently passive loss carryforward. I would guess a return for a family with more than a quarter million dollars income has significant deductions, credits, and investment activity, and at least AMT if not phaseout or other worksheets. Also it seems they didn't do advance tax planning for the rentals; they might need some consultation going forward. So, yeah.

[OldJack]

>>I'm not laughing<<

I'm laughing at the look that will be on that clients face when he is told. LOL

[kcjenkins]

Just remind the clients that there was A REASON WHY THEY SET UP THE MULTIPLE LLCs, and it's worth the extra cost to protect those properties. Sometimes they forget that. It's just like buying insurance. Whether yoou need it or not in any one year, only an idiot does not buy insurance, right?