New rental company LLC does yet own property

[MSFarms]

As two individuals we jointly own a piece of farmland for rental purposes.  We created an LLC in 2021 but have not yet transferred the ownership of the land to the LLC (will be a quit claim).  For this first tax filing, we are only looking to deduct the legal startup expenses and claiming no income from the property since the LLC does not own it (yet).  (We received our individual 1099-MISC for the income and will claim the incomes, property taxes, etc. on our personal taxes as we have done in previous year.)  Turbo Tax desktop app insists on the Form 8825 being filled out but since the LLC doesn't own any property (yet) how do we do this properly? 

[Anonymous_]

It is sufficient if you each contributed your share to the LLC. Has the LLC applied for an EIN?

The execution and recording of a quitclaim deed is a formality for this purpose.

However, since the 1099-MISC shows each of your names and (presumably) social security numbers, you may have to enter them into your personal income tax returns as nominees for the LLC.

You might want to seek guidance from a local tax professional, at least for this first year of operation.

[MSFarms]

The 1099-MISC are to us individually with our personal SSN, so for this year we’ll have to include directly on our personal taxes.  The LLC does have an EIN.  Will legallay transfer property this year and re-do lease agreement. 

involving CPA is easier said than done. Couldn’t even get a call back. Thus…TurboTax. 

[Anonymous_]

I understand, but my point was to include the income from the 1099-MISC on your personal tax returns as nominees for the LLC. Then you would subtract that same income from your personal returns and report it on the LLC return (1065).

[Rick19744]

My reading of the facts indicates that the land has not been transferred to the LLC?

[Anonymous_]

I was under the impression that there was an agreement to the effect that each owner contributed their share to the LLC.

[MSFarms]

We have contributed cash and agree that we will contribute the property. But…due  to some other circumstances we have not (yet) legally transferred the deed to the LLC.

We’ll report our income on our personal taxes from the 1099 MISC issued to our personal IDs.  My question was more about having a Form 8825 that is inherently blank because the LLC doesn’t legally own anything yet and didn’t receive any income. 

[Anonymous_]

If there is nothing to report, an 8825 should most likely not have been generated.

Did you transfer the property via deed (quitclaim or otherwise) and just have yet to record it?

[MSFarms]

We have not signed (or filed) the quit claim deed yet. Lawyer has drawn them up. 

I’m trying to figure out how to get TurboTax to *not* include the 8825. Keeps erroring out on it not being filed in.  

[Anonymous_]

Why are you filing a 1065 if there is nothing to report? 

It appears as if you are each reporting all of the income and expenses on your individual income tax returns.

[MSFarms]

We didn’t want to put ourselves in a situation where there wasnt something filed having gotten the EIN.  In theory we might be able to deduct the legal expenses from the organizational work. But that’s starting to feel like more hassle than it’s worth. 

[Rick19744]

You will be able to deduct or amortize the legal expenses and any other organizational expenses once the LLC begins it's trade or business.  Until then, all those costs are capitalized.

At this point, based on the facts, the LLC has not begun a trade or business.

Based on the following excerpt from the 1065 instructions, I don't believe you have any filing requirement:

Except as provided below, every domestic partnership must file Form 1065, unless it neither receives income nor incurs any expenditures treated as deductions or credits for federal income tax purposes.