Two Member LLC; Now Single Member LLC

Discussion in 'Tax' started by mmurrell, Nov 10, 2009.

  1. mmurrell

    mmurrell Guest

    My client has reported rental properties for many years on his jointly
    filed 1040 schedule E. In February, 2009 he and his wife signed a
    (two member) LLC agreement to house these rental properties. His wife
    died in September, 2009.

    I am confused on how I would report this on his 2009 1040. Do I
    transfer all the assets to the LLC in February, and continue to
    depreciate as before until September, and then transfer the assets
    back to the 1040 Schedule E and continue on with deprectation for the
    rest of the year?

    Would I need to be sure the total depreciation is no more than what it
    would have been if they had stayed in one entity? Do I need to
    separarate all expenses and income similarly?

    This seems to be soooooo much trouble because it is a jointly filed
    husband and wife LLC. He inherited ALL her property through joint
    tenancy. The end result of passing these assets, the income and the
    expenses back and forthe will make no difference in the end amount due
    and oweing in taxes.

    I really just want to report this as a diregarded entity for the
    entire year as a schedule E 1040 item, but I am assuming this would be
    a no no. Any guidance would be appreciated.

    --
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    mmurrell, Nov 10, 2009
    #1
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  2. mmurrell

    D. Stussy Guest

    "mmurrell" <> wrote in message
    news:...
    > My client has reported rental properties for many years on his jointly
    > filed 1040 schedule E. In February, 2009 he and his wife signed a
    > (two member) LLC agreement to house these rental properties. His wife
    > died in September, 2009.
    >
    > I am confused on how I would report this on his 2009 1040. Do I
    > transfer all the assets to the LLC in February, and continue to
    > depreciate as before until September, and then transfer the assets
    > back to the 1040 Schedule E and continue on with deprectation for the
    > rest of the year?
    >
    > Would I need to be sure the total depreciation is no more than what it
    > would have been if they had stayed in one entity? Do I need to
    > separarate all expenses and income similarly?
    >
    > This seems to be soooooo much trouble because it is a jointly filed
    > husband and wife LLC. He inherited ALL her property through joint
    > tenancy. The end result of passing these assets, the income and the
    > expenses back and forthe will make no difference in the end amount due
    > and oweing in taxes.
    >
    > I really just want to report this as a diregarded entity for the
    > entire year as a schedule E 1040 item, but I am assuming this would be
    > a no no. Any guidance would be appreciated.


    Although in general, a 2-person (or more) LLC is a partnership, in this
    case, you have a husband+wife partnership type LLC, so as long as there's a
    joint return, I don't see a problem keeping this on 1040 Schedule E for the
    whole year.

    Depreciation will change in September as a result of the adjustment to FMV
    for her half (that also starts over at year 1). I take it that since he
    acquires via joint tenancy, they were NOT in a community-property state.

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    D. Stussy, Nov 10, 2009
    #2
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  3. mmurrell

    mmurrell Guest

    On Nov 9, 9:51 pm, "D. Stussy" <>
    wrote:

    > Although in general, a 2-person (or more) LLC is a partnership, in this
    > case, you have a husband+wife partnership type LLC, so as long as there's a
    > joint return, I don't see a problem keeping this on 1040 Schedule E for the
    > whole year.
    >
    > Depreciation will change in September as a result of the adjustment to FMV
    > for her half (that also starts over at year 1).  I take it that since he
    > acquires via joint tenancy, they were NOT in a community-property state.
    >
    > --


    The attorney got a federal ID number for the LLC. I am concerned
    about an IRS notice of "non filing" for the LLC partnership. Is this
    concern unfounded?

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    mmurrell, Nov 10, 2009
    #3
  4. mmurrell

    D. Stussy Guest

    "mmurrell" <> wrote in message
    news:...
    > On Nov 9, 9:51 pm, "D. Stussy" <>
    > wrote:
    >
    > > Although in general, a 2-person (or more) LLC is a partnership, in this
    > > case, you have a husband+wife partnership type LLC, so as long as

    there's a
    > > joint return, I don't see a problem keeping this on 1040 Schedule E for

    the
    > > whole year.
    > >
    > > Depreciation will change in September as a result of the adjustment to

    FMV
    > > for her half (that also starts over at year 1). I take it that since he
    > > acquires via joint tenancy, they were NOT in a community-property

    state.
    >
    > The attorney got a federal ID number for the LLC. I am concerned
    > about an IRS notice of "non filing" for the LLC partnership. Is this
    > concern unfounded?


    Yes.

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    D. Stussy, Nov 11, 2009
    #4
  5. mmurrell

    Brew1 Guest

    On Nov 10, 5:48 pm, mmurrell <> wrote:
    > On Nov 9, 9:51 pm, "D. Stussy" <>
    > wrote:
    >
    > > Although in general, a 2-person (or more) LLC is a partnership, in this
    > > case, you have a husband+wife partnership type LLC, so as long as there's a
    > > joint return, I don't see a problem keeping this on 1040 Schedule E for the
    > > whole year.

    >
    > > Depreciation will change in September as a result of the adjustment to FMV
    > > for her half (that also starts over at year 1).  I take it that since he
    > > acquires via joint tenancy, they were NOT in a community-property state.

    >
    > > --

    >
    > The attorney got a federal ID number for the LLC.  I am concerned
    > about an IRS notice of "non filing" for the LLC partnership.  Is this
    > concern unfounded?
    >

    The husband and wife exception to filing a partnership return does NOT
    apply to LLC's. Only single-member LLC's can file via Schedule C.

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Brew1, Nov 11, 2009
    #5
  6. Brew1 <> wrote:

    > The husband and wife exception to filing a partnership return
    > does NOT apply to LLC's. Only single-member LLC's can file via
    > Schedule C.


    Why would that be? For tax purposes an LLC is not recognized. So
    I'd imagine it should be the same rule as for a partnership in every
    respect.

    --
    Stu
    http://downtoearthlawyer.com

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Stuart A. Bronstein, Nov 11, 2009
    #6
  7. In article <Xns9CC08F6F18AA3spamtraplexregiacom@130.133.1.4>,
    Stuart A. Bronstein <> wrote:
    >Brew1 <> wrote:
    >
    >> The husband and wife exception to filing a partnership return
    >> does NOT apply to LLC's. Only single-member LLC's can file via
    >> Schedule C.

    >
    >Why would that be? For tax purposes an LLC is not recognized. So
    >I'd imagine it should be the same rule as for a partnership in every
    >respect.



    Stu

    When you ask why, my favorite answer is Because.

    See this link, and the statement that an LLC does not
    qualify for a qualified joint venture:


    http://www.irs.gov/businesses/small/article/0,,id=177376,00.html




    --

    ArtKamlet at a o l dot c o m Columbus OH K2PZH

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Arthur Kamlet, Nov 11, 2009
    #7
  8. mmurrell

    D. Stussy Guest

    "Brew1" <> wrote in message
    news:...
    > On Nov 10, 5:48 pm, mmurrell <> wrote:
    > > On Nov 9, 9:51 pm, "D. Stussy" <>
    > > wrote:
    > >
    > > > Although in general, a 2-person (or more) LLC is a partnership, in

    this
    > > > case, you have a husband+wife partnership type LLC, so as long as

    there's a
    > > > joint return, I don't see a problem keeping this on 1040 Schedule E

    for the
    > > > whole year.

    > >
    > > > Depreciation will change in September as a result of the adjustment

    to FMV
    > > > for her half (that also starts over at year 1). I take it that since

    he
    > > > acquires via joint tenancy, they were NOT in a community-property

    state.
    > >
    > > > --

    > >
    > > The attorney got a federal ID number for the LLC. I am concerned
    > > about an IRS notice of "non filing" for the LLC partnership. Is this
    > > concern unfounded?
    > >

    > The husband and wife exception to filing a partnership return does NOT
    > apply to LLC's. Only single-member LLC's can file via Schedule C.


    As a business, yes.

    However, the LLC is owing a RENTAL property - which goes on Schedule E.

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    D. Stussy, Nov 12, 2009
    #8
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