In most cases, a single-member domestic LLC is not treated as a separate entity for federal income tax purposes. If you are the sole member of a domestic LLC, file Schedule E (or Schedule C or F, if applicable). However, you can elect to treat a domestic LLC as a corporation.
If you earn rental income on a home or building you own, receive royalties or have income reported on a Schedule K-1 from a partnership or S corporation, then you must prepare a Schedule E with your tax return.
Mortgage payments are not deductible as an expense, depreciate the building. Also, include the $20,000 from LLC1 to LLC2 as rental income on LLC2 or Schedule E.
The IRS disregards the single member LLC entity as being separate and distinct from the owner. Essentially, this means that the LLC typically files the business tax information with your personal tax returns on Schedule C and Schedule E form 1040. The profit or loss from your businesses is included with the other income your report on Form 1040.
Simply, since you are sole owner of all LLCs you can just file a form 1040 with the Schedule C business and Schedule E with the rentals.
LLC Filing Tax Rules
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