Rental to LLC

[nynjtaxman]

Hi I need some help on how to show the transfer of a rental house to a LLC.

The house has been rented and shown on the clients personal return, Sch E for several years. They formed a LLC and had the house transfered to the LLC, which will be filed a partnership ( 2 members) They will show about 6mos each for the Sch E and the partnership return.. How do you end the rental on the personal return. Just drop it? Do you just pick up the same basis and depreciation taken on the new partnership. Thank you for any help.

[michaelmars]

are the 2 partners if the llc husband & wife?

[OldJack]

I am guessing the LLC will be a partnership by a husband and wife and the LLC will be reported on a 1065 tax form with form 8825, "Rental Real Estate Income and Expenses of a Partnership or S-corp". Form 8825 looks like the 1040 Sch-E. The net profit or loss of the partnership will then flow to the 1040 Sch-E, page 2.

That being the case the balance sheet (assets and accumulated depreciation accounts) of the proprietorship (1040 Sch-E entity) just transfers with the same numbers to the LLC as of the date the LLC was organized. If it was not at the first of the year you should have a 1065 report and a 1040 Sch-E part year. Next year there will be no 1040 Sch-E, page 1, just the partnership reported on page 2.

There are exceptions to filing a 1065 partnership return, however, since this is a LLC I would want to document the LLC business tax return with a partnership tax return filing.

[nynjtaxman]

Thank You OldJack. It is a Hub/wife partnership. That's how I thought it was handled, just never did one to a LLC.

Thanks again. Jim.