NC Rental property in LLC

[winnie]

I am seeing more clients buying rental property in an LLC. In the past (without LLC), if I 2 individuals owing a rental together, I would just split income and expenses on the Schedule E with appropriate notes for 1099, 1098 that was usually reported under just one SSN. Even had IRS letter on one that we responded to the split and IRS accepted our response without further issue. I am concerned with the extra layer of an LLC that we need a partnership return.

What are you all doing with these? Partnership returns with K-1, Schedule E with split? Having taken Business law back in the days well before LLC, if they treat this all as personal are the risking loss of liability protection? And, yes, I know we aren't attorneys, but what are your thoughts?

Thanks so much.

[Kram BergGold]

I would ignore LLC

I believe for tax filing purposes you can ignore the LLC.

[JoshinNC]

If the SS-4 lists it as a partnership,

than yes, a 1065 is required. Hopefully they did not elect corp taxation, because I never have a corp own real property. If only a SMLLC than there would be no 1065. I have clients who own only rental property in their LLC's. I advise this for a myriad of reason's, not the least being the liability protection ( I have the advantage of having a real estate attorney in my building who I can tap on when I need advice).

[JoshinNC]

My daughter believes in Santa Claus,

I believe for tax filing purposes you can ignore the LLC.

But that doesn't mean the jolly fat guy exists. If there's a partnership, which this is, there is to be a 1065 prepared.

[winnie]

real estate attorney

Real estate attorneys down the hall are nice!. Thanks. I have been insisting on the 1065, but had one client that was very resistent (a new one of course).

At the end of our conversation yesterday,, I recommended that she speak with her co-owners accountant and that they might interpret things differently than I did and that I didn't have time to prepare her partnership return anyway! This was after I learned that the owners have bought and paid for many big ticket items outside of the LLC, it isn't clear who actually owns the property and who knows who is listed on the mortgage. Sounded like a nightmare to me. Want me to send her to you, Josh? You are close enough!

My understanding was that you can ignore a single member LLC, but not when there are more than one. If anybody has information on anything different, I would love to see it.