Inherited vacation property: To pay expenses, we created an LLC which rents the property year-round. Where does the depreciation belong, if any? The LLC? Individually?

Steve30 · ‎June 6, 2019

Three siblings inherited the property equally in Dec 2015. The multi-member LLC was set up to make tracking rents and expenses easier. I'm not sure it accomplished that, but that's the way it is.

On LLC taxes, the CPA did not include the property and did not depreciate it either on the LLC's taxes or our individual taxes. The LLC made a profit. One sibling (me) is managing the rentals, and the other two are essentially passive.

Do I add the property as an asset to the LLC? A "Loan from Shareholders"? Owner's Capital Equity? Should it be depreciated in the LLC? Something else? TIA for any help.

MichaelL1 · ‎June 6, 2019

The property should be part of the LLC and show as a contribution to capital and transferred to LLC. This would be the easiest way as LLC is renting it.

Otherwise, each would show depreciation on their 1040's with $0 income and that will cause other issues with IRS or losses not being able to be claimed.

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Steve30 · ‎June 6, 2019

Thank you! Excellent points. Do you think I should Use Form 3115 to correct last year's mistake of not reporting the property? Also, I asked this on another thread, but when I include the property in Turbotax Business, it insists the property is domestic, will not let me enter a Cancun address, and will not apply the 40 year period. How do I specify it's a foreign address?

Inherited vacation property: To pay expenses, we created an LLC which rents the property year-round. Where does the depreciation belong, if any? The LLC? Individually?

Deductions & credits

Deductions & credits