Should I have filed a form 1065 for my partnership, and if so, what do I do now?

[bylerandersoncon]

Our partnership was established in 2016 primarily to build spec homes.  We had no revenue, but did have assets and direct construction costs which have been capitalized and will not be expense until we sell the home.

We did not file a form 1065 partnership return since we had no revenue.  Should I have done so?  If so, what do I do now?

[PatriciaV]

If you have no activity or expenses to report for the prior year (see discussion below), and you have not received correspondence from the IRS asking for Form 1065, you are not required to file a return for that year.

However, you may wish to file a return anyway. Although you may believe you had no expenses to report, you may have incurred organizational costs to set up the partnership. You can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs in the year your business begins. And there may be other expenses that you would not capitalize (marketing, home office, travel, etc.). Reporting these expenses will affect partners capital, which may be advantageous if you expect large gains from future sales. Remember, if you do not file a tax return to report these expenses, you cannot claim them in a later year.

Additional Information

• IRS Form 1065 Who Must File
• IRS Pub 535 Business Start-Up and Organizational Costs