the first issue I see is that a partnership return needs to be filed, at least for the first year, for this rental activity.
Domestic Partnerships
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.
A qualifying syndicate, pool, joint venture, or similar organization may elect under section 761(a) not to be treated as a partnership for federal income tax purposes and won't be required to file Form 1065 except for the year of election. For details, see section 761(a) and
Regulations section 1.761-2.
irc 761(a)Partnership
For purposes of this subtitle, the term “partnership” includes a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this title, a corporation or a trust or estate. Under regulations the Secretary may, at the election of all the members of an unincorporated organization, exclude such organization from the application of all or part of this subchapter, if it is availed of—
(1)for investment purposes only and not for the active conduct of a business,
te above raises an interesting issue because some taxpayers consider their rental real estate as qualifying for the Qualified Business Income deduction. if they take the QBI, aren't they saying they're engaged in a business that would then require the filing of a 1065 (except for a qualified joint venture)
yes a PMA would work (not really required) but a written agreement is harder to challenge than word of mouth. however, realize that fees you are paid for repairs, maintenance, and capital improvements would be taxable income to you (reported on schedule C). against this you could deduct the costs involved in rendering these services.
search the internet for an example of a PMA. you may also want a written partnership agreement.
