Discussion:Short Sale, Rental Property, & LLC
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Discussion Forum Index --> Advanced Tax Questions --> Short Sale, Rental Property, & LLC
Discussion Forum Index --> Tax Questions --> Short Sale, Rental Property, & LLC
| 30 October 2009 | |
| Hello,
I have a client with a rental property in an LLC. The property has been rented for a few years, but now he needs to short sale it. In order to do so, he has to take the property "out" of the LLC because the loan is in his name personally. I assume that this will not be an issue, but I am looking for a nudge in the right direction. Would I just sell the property on his personal taxes and input all of the prior deprecation, etc...? Will the IRS question why this rental was not reported on his personal return before? Thanks for the help. | |
| 1 November 2009 | |
| I forgot to mention that it is husband/wife and they have been filing a 1065. From what I have read, they have the option of filing a 1065 or schedule c. So I guess that it may or may not be a single member LLC depending upon how you look at it. | |
Harry Boscoe (talk|edits) said: | 1 November 2009 |
| IIRC, a husband-and-wife LLC rental property has only one choice: Form 1065. | |
| 2 November 2009 | |
| I obviously meant schedule E for rental activities. Regardless, how should it be handled when time to sale? I assume since they are filing jointly it will not be an issue to report the sale on their 1040 and call it a day since it is just going to flow through anyway. I am concerned with reporting the sale in the LLC and having a 1099-S be reported under his SSN and then getting a letter. | |
| 2 November 2009 | |
| I'm a little confused by some of the discussion I've seen on this site about the election for a husband and wife as owners electing not file a 1065. That election is for unincorporated business activities and would not apply to doing business in an LLC unless you are in a community property state. The unincorporated activity that can make the election can file two Sch C's, two Sch F's or two columns on Sch E.
Check out this discussion on the IRS website: [1] | |
| 2 November 2009 | |
| Since this is a state law entity, the Sec. 761(a) election out of Subchapter K is not available. Unless both husband and wife are materially participating, the Sec. 761(f) Qualified Joint Venture election is also not available.
However, assuming the LLC interests are held solely by husband and wife as commmunity property, the couple can choose to report the activity directly on Schedule E. Since they have chosen to file form 1065, the distribution of the property would be treated as a liquidating distribution. | |
| 3 November 2009 | |
| What if I just report the sale on the 1065 and if the 1099-S is questioned I can say that the LLC was the equitable owner of the property and the sale was reported on the 1065? The cancellation of debt is going to be another issue though... | |
| June 4, 2011 | |
| So if a H/W live in CA, which is a community state, can out-of-state rental property they own in an LLC be reported on Schedule E? | |
