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Two Member LLC; Now Single Member LLC

 
 
mmurrell
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      11-10-2009, 12:44 AM
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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D. Stussy
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      11-10-2009, 03:51 AM
"mmurrell" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> 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.

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mmurrell
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      11-10-2009, 10:48 PM
On Nov 9, 9:51*pm, "D. Stussy" <(E-Mail Removed)>
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?

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<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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D. Stussy
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      11-11-2009, 03:16 AM
"mmurrell" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> On Nov 9, 9:51 pm, "D. Stussy" <(E-Mail Removed)>
> 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.

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Brew1
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      11-11-2009, 06:02 PM
On Nov 10, 5:48*pm, mmurrell <(E-Mail Removed)> wrote:
> On Nov 9, 9:51*pm, "D. Stussy" <(E-Mail Removed)>
> 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.

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Stuart A. Bronstein
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      11-11-2009, 10:06 PM
Brew1 <(E-Mail Removed)> 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

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Arthur Kamlet
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      11-11-2009, 11:41 PM
In article <Xns9CC08F6F18AA3spamtraplexregiacom@130.133.1.4 >,
Stuart A. Bronstein <(E-Mail Removed)> wrote:
>Brew1 <(E-Mail Removed)> 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/...177376,00.html




--

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

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<< The foregoing was not intended or written to be used, >>
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<< that may be imposed upon the taxpayer. >>
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D. Stussy
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      11-12-2009, 01:06 AM
"Brew1" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> On Nov 10, 5:48 pm, mmurrell <(E-Mail Removed)> wrote:
> > On Nov 9, 9:51 pm, "D. Stussy" <(E-Mail Removed)>
> > 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.

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<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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