Correct me if I am wrong but the management co collects the rent (tenants chks payable to management co), deduct their exps and issues a check for the remaining balance to the landlord. If that is correct, why is management cos "operating statement" display a "net income" of 30% less then the amt in box 1 of the 1099-misc the management co issued to the landlord, my client. I would think the "net income" and box 1 of the 1099-misc would be the same.
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Net Income
On Form 1099-MISC, the management company is probably reporting the gross rental income received by the management company in its fiduciary capacity as an agent for your client, without accounting for any expenses.
I think you should report the gross rent, and back out the associated expenses, line-by-line, in the appropriate categories, on your client's Schedule E.
Here's why:
Suppose the gross monthly rent is $2000. Back in June, 2008, the water heater had to be replaced. So the property manager used $1300 of the rent to buy a water heater. After other ordinary monthly expenses, and the property manager's fees, your client got a "net" payout for that month of only $441.
But you can't just report $441 rent on Schedule E...
Because the water heater has to be depreciated.
You have to start with the gross rental income.
BMKLast edited by Koss; 03-04-2009, 03:25 AM.Burton M. Koss
koss@usakoss.net
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The map is not the territory...
and the instruction book is not the process. -
A couple of other things to consider. The management company does not do this work for free. You have not mentioned a management fee, but it must enter into the equation somewhere.
And if a management company is handling things, did you actively participate in the rental of the property?
LTOnly in government or politics is a "cut in spending" really an increase. It's just not as much of an increase as they wanted it to be, therefore a "cut".Comment
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