Are these llc k-1 losses deductible ?

[RWG1950]

this has been posted by me before-but possibly not well explained. I was wondering if someone could comment on how they think this situation is best handled on my new customer's 1040.

retired customer and his brother in law formed an LLC 12 years ago to buy some land they have held for investment purposes. over the years they have not rented any of the land with the exception of the years 2013-14 & 15 when a small part of the land was rented for $400 per year total yearly rent.

it is my understanding that the preparer of the LLC returns (over the 12 years) has issued K-1's that have shown ordinary losses each year (in varying amounts) of several hundred dollars from amortized start up costs, depreciation (both now gone) property taxes and LLC return preparer fees.

I was wondering how it is possible to buy land (within an LLC) and deduct such expenses without having income in most of the years.

is it advisable to deduct the K-1 ordinary loss on schedule "E" ?

any comments on this situation would be greatly appreciated

[RWG1950]

I would like to know what method was used to depreciate the land ?

FE

I believe some sort of mower was depreciated .

[spanel]

I believe some sort of mower was depreciated .

I would have NOT filed a return for any year without income. If the LLC only owned land and didn't ever expect income, then what you have is an investment held by the LLC. I would add any expenses to the basis of the land in the event the land ever sold. Any income ($400) would trigger a filing requirement for that year and I would only put the $400 income, any expenses again would be added to the basis of the land.

Sounds like the prior accountant want to pad his pocket.

Chris

[JudyL]

Capitalizing carrying charges is an election

I would have NOT filed a return for any year without income. If the LLC only owned land and didn't ever expect income, then what you have is an investment held by the LLC. I would add any expenses to the basis of the land in the event the land ever sold. Any income ($400) would trigger a filing requirement for that year and I would only put the $400 income, any expenses again would be added to the basis of the land.

Sounds like the prior accountant want to pad his pocket.

Chris

Capitalizing carrying charges is an election that is made by attaching a statement to the return for the tax year under Reg Sec 1.266-1(b)(1).