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husband/wife LLC, start up costs prior to buying rental property

I've read a ton of questions and answers on this topic, but just can't get to my specific situation.  My husband and I formed an LLC in 2021 with the intent of later purchasing a commercial rental property.  In 2021, we only had the legal fees for the set up of the LLC.  In 2022, we had only the license fee for the LLC.  In 2023, be bought the building and had all the closing costs, legal fees, building expenses, etc of the actual building expenses.    

Question:  in 2021 and 2022, where should I have captured the expenses (<$1000) for the startup?  At that time, should I have been filing a 1065 for the LLC?  I understand that now that we have actual income and expenses, I have to do the 1065, but should I have done this 2 years ago?

P.S.  I am a real estate professional with a separate Schedule C for my real estate business.  In 2021 & 2022, I just created a separate Schedule C for the minor loss of start up fees which reduced real estate income and QBI deduction.

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1 Best answer

Accepted Solutions
ThomasM125
Employee Tax Expert

husband/wife LLC, start up costs prior to buying rental property

You didn't need to file a partnership return for 2021 or 2022, as you didn't have any assets or receive any rent income in those years. The expenses you incurred those years would be deducted as start-up expenses in 2023. Since your startup costs are less than $50,000, you can treat them as expenses on your 2023 return up to $5,000.

 

 

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1 Reply
ThomasM125
Employee Tax Expert

husband/wife LLC, start up costs prior to buying rental property

You didn't need to file a partnership return for 2021 or 2022, as you didn't have any assets or receive any rent income in those years. The expenses you incurred those years would be deducted as start-up expenses in 2023. Since your startup costs are less than $50,000, you can treat them as expenses on your 2023 return up to $5,000.

 

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
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