Real property in an LLC

[kathyc2]

That's not how I was reading the IRC 469 which you posted. Note the last lines under (A) "if all gain or loss realized upon disposition is recognized,...the excess of any loss...over any
income or gain...from all other passive activities, shall be treated as a loss which is not from a passive activity." So were there other passive activities involved with any gains? Do you have a 6252 form in the return which may be causing this to happen?

I'm reading it that the LLC itself is the passive activity, and until the dispose of the LLC rather than the underlying assets the LLC owned the passive classification stays.

No 6252. One very small land rent on Sch E that had around $100 loss for 2016.

[Burke]

Yes, but the LLC had no other gains?

[kathyc2]

Yes, but the LLC had no other gains?

No. The expenses before sale were more than the rent revenue. 6K loss on rental, 1K interest income and 40K loss on sale of buildings.

[Burke]

Hmmm...tell you what. I am going to try it in my software and see what happens.

[taxea]

I beg to differ. A husband and wife rental LLC does require a partnership tax return unless in a community-property state.

A trade or business owned by a husband and wife can elect under Section 761(f)(2) to be treated as a qualified joint venture (QJV) and file two Schedule Cs rather than a partnership return. That option is not available when they are the two members of an LLC.

Read: Election for Husband and Wife Unincorporated Businesses from the IRS. An LLC is an unincorporated entity and therefore qualifies spouses, if they are the only partners to elect to be treated as QJV

[Lion]

From the Master Tax Guide:

Qualified Joint Ventures. A trade or business co-owned by a married couple who file a joint return may elect to be taxed as a qualified joint venture instead of a partnership for federal tax purposes ( Code Sec. 761(f)). 6 A qualified joint venture is a joint venture involving the conduct of a trade or business if: (1) the only members of the joint venture are a married couple, (2) both spouses materially participate in the trade or business, and (3) both spouses elect to have the provision apply. The IRS takes the position that qualified joint ventures include only businesses that are owned and operated by spouses as co-owners, and do not include businesses that are run as a state-law entity, such as a limited liability company ( IRS Pub. 1635).

[taxea]

From the Master Tax Guide:

Qualified Joint Ventures. A trade or business co-owned by a married couple who file a joint return may elect to be taxed as a qualified joint venture instead of a partnership for federal tax purposes ( Code Sec. 761(f)). 6 A qualified joint venture is a joint venture involving the conduct of a trade or business if: (1) the only members of the joint venture are a married couple, (2) both spouses materially participate in the trade or business, and (3) both spouses elect to have the provision apply. The IRS takes the position that qualified joint ventures include only businesses that are owned and operated by spouses as co-owners, and do not include businesses that are run as a state-law entity, such as a limited liability company ( IRS Pub. 1635).

thats what I said.