@helpfuluser I'm not disagreeing with you at all. I'm just pointing out other potential legal issues outside of taxes that can be far more costly than not reporting things correctly on a tax return. One big factor is what state the LLC may be in and the laws of that specific state as they pertain to rental property (short or long term) and LLCs. While the laws of some states may afford the LLC a "veil of protection" that is better/higher than others, it just doesn't for many states.
I know in my state of FL, putting a rental into an LLC is probably the dumbest thing liability-wise a rental property owner could do. But still, there are one or two situations (concerning a multi-member LLC) where it's actually advantageous to do so. Bottom line is, seek professional help not only from a CPA or tax lawyer, but from another lawyer who is well versed in the legalities of liability and the such, which has nothing to do with taxes really.
A few years back I had links to about 10-12 cases in Miami, Ft. Lauderdale and Orlando where lawyers had no problem piercing that so-called "veil of protection" of an LLC in this state and the tenant basically wiped out or bankrupted the rental property owners on liability charges. One of the cases involved an insurance claim where the insurance company refused to pay for a total loss due to a fire accidently started by the tenant. The property owner had not updated their homeowner's policy to a Rental Dwelling policy. So since the property was not being used for it's insured purpose as the owner's primary residence at the time of the fire, the insurance would not pay. The property owner lost. On top of that, since the property was not insured that put the owner in violation of their mortgage lending agreement and they basically lost everything when the bank not only to th e land the burned down rental property was on, but they also won in court, the "new" primary residence they have moved into upon vacating their old residence and renting it out.
So when it comes to this rental property stuff, correct tax reporting is just the tip of the legal iceberg.
