Can I use Schedule K line 20(c) to report my property taxes on my family Cabin that is set up as an multi member LLC?

[lcbsel99]

We have a family multi-member LLC.  It is a vacation cabin.  It is not rented only used as a family cabin (i.e., no income is generated).  I have been filing a 1065 and sending each partner a K-1.  Up until this year I was reporting the annual property taxes on line 14 page 1 of the 1065 but last year I asked the turbo tax forum and someone got back to me and said do not put the amount on page 1 of the 1065, put it on line 20 section c of schedule K with a comment (Property Tax, or whatever).  This sounds better to me and it is clear for the other LLC members to take the deduction from their personal income taxes.  Does this make sense?  We also pay a $25 license statement to the state of Michigan and I would add that there too.  Key is we do not have a real business.  I have been doing this for 7 years and it has never seemed right putting it where I was putting it and I like what the guy told me last year.  I did not do it last year because by the time he got back to me I had already filed.

[Rick19744 · Accepted solution]

You should not be putting any of these expenses on page 1 of the 1065 for exactly the reason you stated; this is not a trade or business.

The expenses should be reported as you noted in your facts; Schedule K line 20(c) with a statement identifying the type of expense.  I would stay away from providing too much tax advice, but you could indicate that the property taxes could be reported on their form 1040 Sch A if they itemize their deductions.  The $25 represents your LLC fee to the state of Michigan as a nonprofit entity I assume.  I don't believe this is deductible as it is not a tax.

[lcbsel99]

I might have messed this up.  When I enter the property tax amount on Schedule K line 20(c) I just put the amount.  I type "Property tax" then enter the dollar amount.  Turbo Tax does it's thing and each partner has their portion on their K-1.  But should I be entering the - sign in front of it (or however you designate money we spent on the Turbo Tax app)?  Each of my siblings know it's the property tax and then they enter their portion on their on federal return. 

I have been doing this wrong for years.  So if I have been doing this incorrectly do I have to refile all of them?  Any advice would be appreciated.

Regards,

Lawrence

[WendyN2]

No, you have not been filing so incorrectly as to have to amend anything. Your oversight errors are minimal and considered immaterial. What you should make sure you are doing, for TurboTax fees, is list this as "legal and accounting" fees. In addition, your property taxes can either go on the 1065 and then be adequately allocated to each sibling, or, they can be individually reported on their Schedule A of 1040 - this should be whatever provides the greater tax benefit. Since this is a private property and has never been used as a rental, it is not a business but yes a partnership. You should look into filing it as an LLC for everyone's future benefit. Any other questions, please ask!

[lcbsel99]

Thank you for your input.  It is an LLC, I should have included that.  Strictly a vacation home for our family.  To tell you the truth I did not know if that previous post took so I re-did it and explained more.  Do you think I can just keep entering the number as I have been?  I already filed this years (2020) and was entering my data on my 1040 and was wondering how I should write it up on the K-1 (as a - or a +)  I did look but it never clarified.  Of course it says deduction and I think it should probably be a - in front of it.

[ThomasM125]

Line 20(c) on form 1065 is fine for the property taxes, since it is just for "Other Information." I don't think you should enter the licensing fee as it is not tax deductible, unless it is considered a property tax and is calculated based on a percentage of the value of the property.

You do need to file the LLC return since you have a partnership and it owns property.

[ccasler]

I am in same situation as this person ie: have a seasonal family cabin that has no income. I am trying to put our property tax payment in Line 20 (c) or 13 as a W on the 1065, but it is shaded so I cannot enter it on the form. Is there somewhere in the step by step instructions that I need to put this number so it will flow either to 20(c) 0r 13 W on the K1's?

[MarilynG1]

To enter a Schedule K-1 which you have received, in TurboTax Online:

1. Click on the Federal, on the left, in the black toolbar
2. Select Wages and Income or (Income and Expenses), at the top tab
3. Scroll down and click on Show More for S-corps, Partnerships, and Trusts
4. Click on Start or Revisit for Schedule K-1

Please be sure you select the correct type of K-1, as there are several forms with use them and the boxes are different in each one.

You will need to check the box 'This K-1 reports amounts in more than boxes 1, 2, and 3' to get to the Box 13 entry. 

[ccasler]

Thank you for the response but that is not my question. I am completing the1065 for our family LLC to create the K1's.  I am trying to enter the property taxes in the correct place, which in the past was line 13 code W , but I do not see a correct line to enter this info so

it flows correctly to the K1s.

[AliciaP1]

You need to enter the information on Schedule K  line 13d at the bottom where there are blank lines to input additional information.  To do this please follow these steps:

1. Within your tax return, switch to forms mode by using the Forms icon in the upper right of your screen
2. On the left-hand menu, choose Form 1065 p4-5
3. Scroll down on the form preview to Line 13d Other Deductions and continue scrolling to the blank lines under code O
4. Use the dropdown box in the left-hand box to choose W - Other Deductions
5. Input "Property Taxes" in the middle description box
6. Enter the full dollar amount paid in the right-hand box

TurboTax will then allocate the information on the Schedule K to the Schedule K-1s according to the applicable percentages. 

@ccasler