I have a client that has a Partnership with his son. Father bought a new house that is 1,300 sqf with a 1,200 sqf storage shed. He uses the storage area for storing the equipment and paint for the business. The cost of the house was $550,000. How do I figure out the cost for the storage area and should that go on the Partnership Return, or his personal return on a schedule E with his k-1
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The Partnership does not own it and has not paid anything for it, so it does not go on the Partnership return.
Does the Partnership agreement require the Father to pay for this expense? If so, it is an Unreimbursed Partnership Expense (UPE) which is a deduction on page 2 of Schedule E.
As for the cost, some counties may have the valuation of separate buildings (and land) for real estate tax purposes. If that county does not do that, then the taxpayer could hire a qualified appraiser to value things.
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