taxes, llc, k1 land ownership

**jpg7n16** · 03-04-2011, 10:47 AM

IRS.gov: Limited Liability Company (LLC)

If you're owning property intending on a profit - you're in the real estate ownership 'business.'

Something to note from the page, is that you don't file taxes as an LLC - you get to choose to file as either a corporation or a partnership. (you can't do sole propreitorship since there's more than one owner)

And since you're talking about a K-1, you must be filing as a partnership; which is a flow-through entity. Meaning all gains/losses maintain the same characteristics - they just flow through to the owners in accordance with ownersihp percentage.

Example: the LLC has $100,000 long term gains, and $5000 short term interest income. You own 60%, and he owns 40%. If filing as a partnership, 60% of the income just flows through to you.

60% * 100,000 = 60,000 long term gains
60% * 5,000 = 3,000 interest income

You then claim those incomes on your own personal return in the appropriate categories. The rest would flow through to your brother, and he would claim it on his personal return.

If all you did was buy some land, what income would there be?

**Carphunter** · 03-04-2011, 10:50 AM

income doesn't concern me (there is none). but reading stuff, wondering if all the legal fees, abstracts and other stuff we payed for (expenses) are deductible in some way.

**jpg7n16** · 03-04-2011, 11:13 AM

The expenses will flow through too

based on ownership percent as described above.

So you may be able to deduct some of the legal set up fees, but they would likely be subject to a 2% floor. Meaning you could only deduct the fees in excess of 2% of your AGI.

Publication 529 (2010), Miscellaneous Deductions

Though make sure you check your expenses against the list of non-deductible ones: Publication 529 (2010), Miscellaneous Deductions

Notable non-deductible:
-Home repairs, insurance, and rent.
-Losses from the sale of your home, furniture, personal car, etc.

I don't think you would meet the criteria for complete deduction:

From: Passive Activity Loss ATG - Exhibit 6.3: LLCs: Passive Activity Issues (see notes at bottom of link)

RENTAL REAL ESTATE LLCs filed as PARTNERSHIPS: For 1994 and subsequent years, a taxpayer who spends more than half his personal services in real property trades or businesses AND works more than 750 hours in real property trades or businesses AND materially participates in each rental real estate activity may deduct losses in full. See IRC � 469(c)(7), Reg. � 1.469-9, and Chapter 2.

But you should definitely consult with your tax professional to see which of the expenses would or would not be deductible in your specific situation.

**Carphunter** · 03-11-2011, 07:55 AM

made it through filling out the 1065. whole lot o' zeros.

when I hit the line on my personal taxes, though about my business income/k1... it asks about unremimbursed expenses.

I'm trying to find something that confirms whether or not all the costs/fees paid to make the llc, secure the land contract, etc., count... or not

**Carphunter** · 02-11-2012, 08:05 AM

reviving the dead

Have to do the same forms again this year.

The only question that now I have to consider is on the 1065, number 14... Taxes and Licenses.

Reading the instructions... It appears that Real Estate taxes would apply here... but I want to find confirmation of that.

taxes, llc, k1 land ownership