Do We Have to Prepare a 1099???

I and my 3 siblings own an apartment house as tenants in
common - each with an equal ownership interest. A
management company manages the property, collects the rent,
pays the bills, keeps a percentage (management fee) for
themselves and sends the residual to each of us. They also
keep an additional fee when they rent a vacant apartment.

Do we have to prepare a 1099 to give to the management
company in respect of their fees?

If so - who prepares the 1099 since no one entity owns the
building? Or does each owner have to prepare a 1099 for
his/her respective share of the management fees? Also, is
it a 1099M or some other 1099?

Thank you for your assistance.

Robert Leavitt

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BobLeavitt wrote:

> I and my 3 siblings own an apartment house as tenants in
> common - each with an equal ownership interest. A
> management company manages the property, collects the rent,
> pays the bills, keeps a percentage (management fee) for
> themselves and sends the residual to each of us. They also
> keep an additional fee when they rent a vacant apartment.
>
> Do we have to prepare a 1099 to give to the management
> company in respect of their fees?
>
> If so - who prepares the 1099 since no one entity owns the
> building? Or does each owner have to prepare a 1099 for
> his/her respective share of the management fees? Also, is
> it a 1099M or some other 1099?

A 1099-misc is not required, since this is not in connection
with a trade or business.

ChEAr$,
Harlan Lunsford, EA n LA

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"BobLeavitt" <> wrote:

> I and my 3 siblings own an apartment house as tenants in
> common - each with an equal ownership interest. A
> management company manages the property, collects the rent,
> pays the bills, keeps a percentage (management fee) for
> themselves and sends the residual to each of us. They also
> keep an additional fee when they rent a vacant apartment.
>
> Do we have to prepare a 1099 to give to the management
> company in respect of their fees?
>
> If so - who prepares the 1099 since no one entity owns the
> building? Or does each owner have to prepare a 1099 for
> his/her respective share of the management fees? Also, is
> it a 1099M or some other 1099?

Oops - I have a somewhat similar situation -

During 2004, residential real estate owned 75% by a trust
and 25% split between my brother and I. I don't believe
that my brother and I, being individuals, have to prepare
1099s, but does the trust (for which I am trustee) have to
prepare 1099s for payments made to service providers?

In the interests of full disclosure, my brother and I are
beneficiaries of the trust.

Appreciate any advice. Thanks, Marco

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(JanZtax) asked
>> Do we have to prepare a 1099 to give to the management
>> company in respect of their fees?

and Harlan Lunsford wrote:
> A 1099-misc is not required, since this is not in connection
> with a trade or business.

I don't agree with Harlan. For these purposes, owning rental
property is considered a business and 1099 forms need to be
issued to anyone who has provided more than $600 in
services.

However, my guess is that the management company will issue
a 1099 form to you. They've collected the money and needs to
provide that as an accounting to you (and the IRS).
Therefore, you don't issue one to them.

Jan Zobel EA

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JanZtax wrote:
> (JanZtax) asked

>>> Do we have to prepare a 1099 to give to the management
>>> company in respect of their fees?

> and Harlan Lunsford wrote:
>> A 1099-misc is not required, since this is not in connection
>> with a trade or business.

> I don't agree with Harlan. For these purposes, owning rental
> property is considered a business and 1099 forms need to be
> issued to anyone who has provided more than $600 in
> services.
>
> However, my guess is that the management company will issue
> a 1099 form to you. They've collected the money and needs to
> provide that as an accounting to you (and the IRS).
> Therefore, you don't issue one to them.

Also, if the management company is a corporation or
partnership, they don't need to receive a 1099-MISC (unless
they double as a law firm).

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JanZtax wrote:
>>> Do we have to prepare a 1099 to give to the management
>>> company in respect of their fees?

> and Harlan Lunsford wrote:
>> A 1099-misc is not required, since this is not in connection
>> with a trade or business.

> I don't agree with Harlan. For these purposes, owning rental
> property is considered a business and 1099 forms need to be
> issued to anyone who has provided more than $600 in
> services.

Quite all right, Jan. I've noticed that the prevailing
attitude among California preparers seems to be that
individual taxpayers with schedule e rentals need to issue
1099-misc.

An IRS person long ago told me that such rentals were not a
"trade or business", so I rely on what the instructions for
1099's say in there handy dandy table towards the back of
the pamphlet.

ChEAr$,
Harlan Lunsford, EA n LA

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