Rental Question

[Terry D EA]

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.

[MsTabbyKats]

Why not just split the basis?

[Guest Taxed]

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??

[imjulier]

Terry-

I've done this on Sch E by just using 50% ownership and splitting the basis as someone else suggested. No problems.

Julie

[jasdlm]

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.

[GeneInAlabama]

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.

[joanmcq]

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.

[BulldogTom]

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

[Terry D EA]

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.