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About John Stancil, CPA
Expertise
I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I teach tax and accounting at a small church-related college. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a part time tax practice for over 30 years. I am a member of the AICPA, National Association of Tax Professionals, and the Institute of Management Accountants. Visit my website at www.johnstancilcpa.com. Also visit my blog, www.thetaxdocspot.com.

Experience
I hold a doctorate in Accounting, and four professional certifications: CPA, CMA, CFM, and CIA. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I write a monthly tax column for the local newspaper. I have prepared taxes for over 30 years.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill College

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Tax Law (Questions About Taxes) - Rental Property LLCs what tax forms to use?

Expert: John Stancil, CPA - 11/5/2009

Question
QUESTION: My wife and I own 2 residential apartment buildings owned as LLC's. Up until now I have used schedule E (before converting from sole proprietorship to LLCs) but I understand I can't use it anymore. I would like to know what forms to use and where to put the information. I would also like to do a home office deduction but don't where that goes. I can handle all the tax stuff (depreciation, ...) but I need to know where to put it. I called the IRS and they said my wife and I are now considered a partnership. She said I need to use the following forms:8825, Schedule K1 (1065), Schedule E part II (line 28)and form 8829 for the home office deduction. I'm confused this is a lot more complicated than just using Schedule E!

ANSWER: Jeff,

Thanks for your question. The IRS agent was mostly right.

Since you are now operating the rental properties as an LLC you are reporting as a partnership and need to report those activities on Form 1065. You will include Form 8825 for the rental activity and a part of the 1065 will include a K-1 form for each of you. The amounts shown on the K-1 will be reported by each of you on your 1040.

You do not use Form 8829, but use the worksheet on page 26 of Publication 587. The amount of the deduction will be entered on your K-1 as unreimbursed partnership expenses.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

QUESTION: The K-1 you mentioned is Schedule K-1 (Form 1065) not Form 1065 Schedule K (Partner's Distributive Share items) right? I have a LLC for building #1 and an LLC for building #2 and a management company LLC that handles the money. When it asks for the name of partnership on form 1065 would that be the management company LLC and its EIN? or our names (and SS#s) or? On Schedule K-1 (form 1065) Part I it also asks for Partnership name and EIN would that be the management LLC? It also asks where the partnership filed its tax return? Is there a partnership return? In G in part II would we be general partner or limited partner?

Where on K-1 (which line) would I put the home office deductions (unreimbursed partnership expenses)?

Sorry for all the questions.

Thanks again!
Jeff

Answer
Schedule K of Form 1065 is a part of the 1065. It is the summary of all K-1's that are issued.

If you have 3 LLC's you need three returns, one for each, placing the name and ein of the partnership (LLC) on the and K-1s.

The 1065 is the partnership return. You are a general partner.

Home office deductions are unreimbursed partnership expenses.

Hope this helps.

John Stancil, CPA

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