MULTI-MEMBER LLC WITH SINGLE MEMBER SUBSIDARY

[missmeg]

HOW DO I FILL OUT A 1065 FOR A MULTI-MEMBER LLC WHICH IS A HOLDING COMPANY  TAXED AS PARTNERSHIP WHICH OWNS A SUBSIDARY ANOTHER LLC (SINGLE-MEMBER) THAT HAS RENTAL INCOME. JUST NOT SURE WHER TO PUT THE RENTAL INCOME FROM THE SUBSIDARY.

1) SHOULD I FILL OUT FORM 8825 ON 1065?

2) SINCE THE RENTAL INCOME WAS PAID TO THE SUBSIDIARY, HOW DO I SHOW WHICH COMPANY THE INCOME IS FROM ON THE 1065? 

[PatriciaV]

It depends.

If you have not taken the S-Corp election for your SMLLC, the IRS considers the LLC and the holding company to be one taxpayer. In this case, you would enter rental activity on Form 8825 as part of the Form 1065 return.

If, however, you have elected to be taxed as a corporation (S-Corp), your SMLLC must file a separate business tax return (Form 1120-S) to report the rental activity. In this case, Schedule K-1 from the 1120S return would be reported on the partnership 1065 return.

The rental income from Form 1099-K should be reported on whichever return applies (as discussed above). If the property is owned by the SMLLC, any rental income you received (or reported under your SSN) still belongs to the SMLLC and should be included with the income from Form 1099-K.

Note that you will need TurboTax Business to file either Form 1065 or Form 1120S.

[missmeg]

THANKS

[PatriciaV]

If the property is not held in the name of the SMLLC or the holding company, all rental income and expenses should be reported by the owner. If that is an individual, the rental activity would be reported on Schedule E of a Form 1040 individual tax return.

You may wish to consult a local tax or legal professional on the structure of these companies and the issue of the property title. The outcome may change how you file tax returns both this year and in the future.