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1065 real estate holdings LLC question

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    1065 real estate holdings LLC question

    I am completing a return for a client who has two LLCs. One is a husband-wife owned car repair shop and the other is a building that they bought which is the same place where the car shop is. Let me explain. So when she bought the building where the car shop is at, the county required that she had to form a company in order for her to use that building for business purposes. Therefore, she created a real estate holdings LLC with her husband. This was done before I met her. I completed the car shop one, pretty easy 1065. However, I am having some doubts, questions about the "real estate holdings LLC." The only income they get for the real estate holdings LLC is literally the rent money that her other business (the car shop) is paying her. Both companies do not own each other. However, my dilemma now comes at this, is this a related party issue or how would I go about searching a proper IRC code to find my answers to this?

    I mean, I know the gross earnings, but expenses? She paid money up front when she purchased the property, and the rest was placed on a mortgage they pay through the payments they get from the car shop. Again, both businesses are in the same location. The building is owned by the husband-wife (LLC) and the car shop is inside (also owned by husband-wife).

    I've never had a return like this before, so any assistance in guiding me to the right direction, will be greatly appreciated it. Thank you!


    #2
    The Holding LLC reports the rental income, Depreciates the building, pays real estate taxes and mortgage for starters. Depending on any lease agreement, pays all expenses of the building. Car Repair shop can pick up all expenses except Depreciation on building and mortgage. I don't believe Related Party has any issue here. Holding LLC pays no SS on it profits. Car Repair LLC does pay SS on net profits
    Last edited by BOB W; 02-24-2021, 10:22 PM.
    This post is for discussion purposes only and should be verified with other sources before actual use.

    Many times I post additional info on the post, Click on "message board" for updated content.

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