Partnership buys investment

[oceanlovin'ea]

property such as a house or condo. They have bought it for resale and probably won't use it as rental income.

What expenses are allowed on a yearly basis? Any? I looked in the Tax Book under partnerships and nothing is mentioned even about rental real estate on a partnership return.

Any ideas where I can find more information about this? First time I have had a partnership do this. Would like to know more about this.

Thanks

Linda F

[Bees Knees]

When you say they bought it for re-sale, do you mean they are going into the real estate business? Buying and selling property?

Or is this just an occasional investment where they buy property, hold onto it for a period of time and make a profit off of the appreciation?

Partnerships would be treated just like any individual doing the same. Buying and selling investments that is not a trade or business activity is a Schedule D transaction, with current expenses being deducted on Schedule A, subject to the 2% AGI limit.

TTB, page 20-5 talks about separately stated items for a partnership return. Capital gain transactions must be separately stated. Investment expenses should be separately stated on the K-1, line 13, Code K as portfolio expenses subject to the 2% floor.

On the other hand, if the partnership were going into the buying and selling of real estate business, the property would be inventory and all transactions reported on page 1 and 2 of the 1065 as business income.

[oceanlovin'ea]

Rental

Client emailed me that the house is available for rent or for sale. But neither has happened yet.

So I will consider it rental property. I will talk to them about what the purpose of the partnership is. for rental property or just to buy houses and sell them.

Thanks

Linda F