Here's the bottom line.
Rental property is reported on SCH E *no* *matter* *what*.
So if the property is in a multi-member LLC that files a 1065 partnership return, all the rental stuff is still reported on SCH E as a physical part of that 1065 Partnership return. Period. End of story.
Now you do have my curiosity piqued here. So I've a few questions for you if you don't mind. I'd really appreciate it. I'd also like to know what state you're in. (I'm in FL)
I have an LLC that was formed to build the house.
Why? I'd like to understand your reasoning for establishing a multi-member LLC for this, instead of taking the much simpler and significantly cheaper path of just forming a simple partnership. How was forming an LLC more beneficial to you, than just a simple partnership? It doesn't change the fact that the two of you were both still equally liable for the construction loan - LLC or not. In other words, the LLC provided you absolutely no protection if there was a default on the loan.
The house is not titled ON THE DEED in the name of the LLC,
So this is why I asked why you formed an LLC. The LLC owns nothing and never has owned anything.
IT is titled on the DEED in the name of the 2 individuals as a personal loan to the LLC.
I seriously doubt the deed states anything about any personal loan. The only entities listed on the deed are the two property owners and they're listd as owners. Additionally, the construction loan lender/mortgage lender is listed as the lien holder. That's pretty much it unless there's details you've not made us aware of.
However, the LLC was formed to build houses. I can still run the bills, and all the taxes and depreciation and the profit/loss thru the LLC?
Sure you can. Just keep in mind that everything is reported on SCH E of that 1065 partnership return. As for what you can claim pertaining to the loan, it depends on if you converted the construction loan to a mortgage, or if you completely refinanced the property to pay off the construction loan.
As I'm sure you're aware, the LLC/Partnership will issue each member a K-1 which each member will need in order to complete their personal 1040 tax return. All information on the K-1 pertaining to the rental property will appear on page 2 of the SCH E that is a part of their personal 1040 tax return.
