LLC1: I own a single member LLC that is a TIC co-owner of the rental property
LLC2: I own another single member LLC that is used for the property management and collects management fees.
in my opinion, if the management fees it collects are from LLC 1, then my previous thread applies. LLC 1 and LLC 2 for tax purposes are one taxpayer/tax entity. so such fees paid from 1 to 2 would not be an expense to 1 nor income to 2. you are paying yourself. if it manages other property owned by different tax entities then those management fees received would be income even if it's 3
LLC3: Someone else owns a different LLC that is a co-owner of the rental property with LLC1
any fees 1 pays to 3 for managing 1 would be deductible since it is a separate tax entity.
depending on all the facts and circumstances the IRS could conclude that 2 and 3 serve no business purpose and were merely formed to convert rental income into earned income so certain tax benefits could be obtained.
see if others comment on this thread.
