1099's needed?

[Gretel]

I am not sure if the following scenario requires 1099's.

Rental LLC (1065) builds apartment complex to keep and, once finished, to rent.

Is this considered a business that needs to issue 1099's until project is finished?

Would it be different if single member LLC since disregarded for Federal purposes and only businesses need to issue 1099's?

[Lion]

Business

Isn't a SMLLC a business needing to report ICs on Form 1099?

[JG EA]

Yes, a 1065 is a business that issues 1099's. I also view disregarded partnerships with investment property as needing to send 1099's.

A Schedule C taxpayer - building was built as a rental building and no services provided - would go onto a E.

So, I still have your question myself - would a disregarded LLC need to issue a 1099 to the individual? I would think not.

[Gretel]

Yes, a 1065 is a business that issues 1099's. I also view disregarded partnerships with investment property as needing to send 1099's.

It's probably safer to view partnership LLC's for investments as businesses if they construct real estate. JG, I am not sure if you also think that the rental activity for this 1065-LLC would be subject to 1099's. With a 60-unit rental you easily have repairs of more than $600 per contractor.

[JG EA]

In general instructions: "Any person, including a corporation, partnership, individual, estate, and trust, who make reportable transactions during the calendar year must file information returns to report those transactions to the IRS..."

In 1099 Misc instructions: "Trade or business reporting only. Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit...."


So, I think it comes down to is it a trade or business. I think if it is a partnership then it is by the above definition. But I am willing to be proven wrong. Because an individual certainly is engaged in making a profit when they buy stocks or have rental property - but both of these activities are not a trade or business and do not require 1099's. So the question: If it is an investment vehicle only is there a difference? I think that by being a partnership it is in the realm of a "trade or business" and needs to send 1099's.

I wish some others would give an opinion on this.

[erchess]

When in doubt

issue the 1099. I believe I am correct in stating that if you issue them when not required your only downside is that you may annoy the recipient whereas if you fail to issue them when required there are penalties from the IRS.