Tax Law (Questions About Taxes)/RENTAL INCOME, LLC

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QUESTION: Hi John,

i own residential rental real estate through my llc.  i have one partner who is not actively involve. our share is 95% to me and 5% to him. i am aware that for llc end of the year taxes i need to fill out form 1065. i had a lost of income in 2015 and i can see the share of lost for me (95%) and share of lost for my partner(5%) in the 1065 form.

for some reason, i thought that in order to report my share of lost and my partner, i  need to fill out a k1 form for each of us. that k1 will get to the irs and needs to be included in personal taxes. however, i dont see k1 form mentioned in the form 1065

can you explain what needs to be done to report the lost for each of us?  
1. will form 1065 be sufficient and we both report in our personal taxes our share of lost listed in 1065 form?
or
2. do i need to file k1 form for both of us?
or
how is this lost amount reported to irs? do i need to fill out any form like k1 or something

ANSWER: Kyle,

Thanks for your question.

You will need to include a K-1 for each partner. The program will not generate a k-1 unless the information on each partner has been entered, showing the distribution of gains or losses.

Hope this helps.

John Stancil, CPA

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

QUESTION: thank you John. i have another question if you dont mind. when i setup the llc, i set it up as member-manager.  i am a member who also manage and my partner doesnt get involve in the days to days activities. in the k-1 (1065 form), it is asking me if i am a general partner/ llc member manager or limited partner.

i am guessing i should choose the box "general partner/ llc member manager"
and my partner is a limited partner. is this correct?

how would irs determine if i am a general partner or llc member manager?
is this the same thing? can you explain? thanks

Answer
NO. In order to have a limited liability partner, your organization must be formed as a limited partnership. That is a legal form of business requiring a state charter as such. You are both general partners but you are also a member manager. Member manager is the owner who is manager of the business. A general partner is all partner that are not other types of partners. Legally there is no significant distinction for tax purposes.

John Stancil, CPA

Tax Law (Questions About Taxes)

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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 am Professor Emeritus at Florida Southern 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 CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

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

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