Husband and wife LLC with one rental to close to personal rental

[TPSigns]

I have a new client that I took on which is husband and wife that set up a LLC to maintain one rental. They now want to switch to reporting on Schedule E on their personal for 2023. The problem is their prior CPA only took in their income and expenses and never verified their ending cash balance and never filled out the balance sheet on LLC's return since inception in 2019 because of not hitting the limit of being required to. I requested the basis worksheet and depreciation from the prior CPA for 2022 taxes to be sure there was basis for the activity loss to take on their personal return. That is all I have. I am not sure where to begin since I don't have the full picture to close the LLC in 2023. But I do know I have to report the disposal of the rental off the depreciation schedule but don't I have to also report disposal of the entire LLC and how to do that with incomplete balance sheet? Thanks for any input and help you can give me.

[Uncle Sam]

You need to know if there are any outstanding liens, debts, mortgages etc of the LLC before you can close the LLC

[TaxGuyBill]

Is this a Community Property State?

It sounds like you know the Basis and the depreciation. What exactly are you looking for that you would want the Balance Sheet?

If the want to report the rental on their 1040 (*IF* they are allowed to), I think the 2022 return would need to be amended to be a 'final' return and the 1040 be amended to report any gain/loss of the Partnership interest.

[TPSigns]

This is not a community property state. They however have 50/50 % ownership of the LLC. This is to happen in 2023 so no amendment needed for 2022. Thank you both for input. So, then I can safely assume that it will be okay to close the LLC if no outstanding liens, debts, mortgages and with what I have, 2023 activity up to closing plus the cash ending balance LLC has at closing. I welcome additional advice and input if any. Thanks.

[TaxGuyBill]

This is not a community property state. .

A multi-member LLC can not report the rental on page one of Schedule E. It needs to be on a 1065.

Are you saying they want to remove the rental property from the LLC, so it is only directly by them and there is no longer a LLC (or owned by a Single Member LLC)?

[spanel]

I have a new client that I took on which is husband and wife that set up a LLC to maintain one rental. They now want to switch to reporting on Schedule E on their personal for 2023. The problem is their prior CPA only took in their income and expenses and never verified their ending cash balance and never filled out the balance sheet on LLC's return since inception in 2019 because of not hitting the limit of being required to. I requested the basis worksheet and depreciation from the prior CPA for 2022 taxes to be sure there was basis for the activity loss to take on their personal return. That is all I have. I am not sure where to begin since I don't have the full picture to close the LLC in 2023. But I do know I have to report the disposal of the rental off the depreciation schedule but don't I have to also report disposal of the entire LLC and how to do that with incomplete balance sheet? Thanks for any input and help you can give me.

What was the reason for creation of the LLC originally? What has changed since then?

Chris

[TPSigns]

They had the LLC originally for liability protection and now they realize the difficulty of getting their beach rental insured since it is owned by LLC, even more so now that it's experienced a hurricane about few years ago. I learned that pretty much insurance companies do not want to insure beach properties owned by LLCs. So they want to remove the rental from LLC and close the LLC transferring the ownership of rental to them personally (they owning it directly) then reporting it on their Schedule E. They want to be able to insure their rental which is the sole reason for the change to owning it directly and closing down LLC.