self rental and disregarded entities

[samingeorgia]

OK, I have a client who operates his Schedule C business under an LLC. Another LLC, owned by him, holds the real estate and rents it to the business LLC. The auditor is proposing moving the operating expenses of the rental to Schedule C and disallowing the rent expense. In effect, the item on Schedule E will drop off. I maintain that since the property and business is in separate LLC's, this adjustment is not needed. The LLC's are disregarded entities. What say the sages of the ATX community?

[jainen]

>>the property and business is in separate LLC's<<

Who cares? LLC's are disregarded entities, so disregard them. He must have found his tax avoidance guide in an old library. The IRS shut down this scheme long ago. You can't avoid SE tax by shifting income to--who did he shift it to, himself?