Commercial Rental Property

[BHoffman]

Preparing a partnership tax return for a Restaurant. The partners are an SCorp owning 99%, and an individual owning 1%. The individual owns 100% of the Partner SCorp. Everything is going to flow thru onto the individual's 1040.

This partnership owns the building it occupies, plus another down the street. That building is rented to an unrelated party.

Should I enter all of the rental activities on form 8825? Including the property taxes and loan interest? I'm asking because the prior tax preparer only showed the rental income and depreciation on the form 8825. The interest and property taxes were mixed in with the other restaurant operations on the 1065.

If I just list the rental income and the depreciation on form 8825, it results in a $50k loss for the restaurant operation and $40k profit on the rental. Something doesn't seem right......but it is pretty late

Any advice is welcome

[TaxLadyinPA]

Here is my two cents worth

Someone else jump in here and slap me if I am thinking wrong here … but … this is what I think.

The rental property should be claiming ALL expenses that pertains to it i.e. the mortgage interest, real estate taxes, repairs, etc.


If I remember right ….. the loss on a rental property will NOT pass thru to the individual. It will sit right there and carry forward to another year. Would that be the case here if all expenses were claimed on the rental property…… it would show a loss?

Where as if the expenses were shoved into the restaurant expenses then those losses will of course pass thru on the K-1 in the current year.

So either the preparer said 'we can claim all expenses on the restaurant' OR the client never told the preparer which expenses pertained to the rental and the preparer assumed wrong.

Everyone else smarter than me …….. am I right in my statement regarding rental losses? I don't have time to look it up to verify...