Two Member LLC; Now Single Member LLC


M

mmurrell

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

D. Stussy

mmurrell said:
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.
 
M

mmurrell

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?
 
D

D. Stussy

mmurrell said:
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.
 
B

Brew1

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.
 
S

Stuart A. Bronstein

Brew1 said:
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.
 
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D

D. Stussy

Brew1 said:
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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