Partnership with properties in LLC name Refinanced had to change Title to Members Nam

[Tess does Taxes]

Is there any tax consequence on a Form 1065 if the members of an LLC formed in Arizona, (Treated as a Partnership) did a Refinance in 2012 and the Lender requested that they quit claim the properties in to the names of the individual members?

There was no Sale involved. But now the properties are no longer titled to the LLC. Does the IRS care. Because the Banks sure do. Their note states that if they change the Title again they could recall the note.

Anyone know for sure?

[Roland Slugg]

Yes, it certainly does make a difference. Since the partnership/LLC no longer owns the real estate, it should not report income, expenses and depreciation for that real estate on F-1065 after the changeover date.

Once the real estate was deeded back to the individual owners, it became, simply, jointly owned property. If the owners of that property just rent it out and do not provide significant services to their tenant(s), then they should NOT file a partnership return (F-1065). Rather, each owner should report his share of the income, expenses and depreciation for that real estate on page 1 of Schedule E (Form 1040), Rental Income.

See the definition of a partnership on page 2 of the instructions for F-1065.