As a "pass through" entity, the property manager must issue 1099-MISC form(s) to the property owner(s) and IRS, and submit a 1096 to the IRS summarizing the 1099-MISC form(s) issued to property owner(s).
The rental income and expenses are not income and expenses of the property manager's business.
Maybe here's an example:
Property manager receives $10K rent from tenants.
Property manager issues 1099-MISC form(s) to property owner(s) for $10K.
Property manager submits a 1096 summarizing & reporting $10K for all 1099-MISC form(s) issued and submitted.
Property owner(s) report rental income of $10K, and rental management expense of $1K on tax return(s). (see note)
Property manager reports business income of $1K on tax return.
(note) The main question under discussion is whether the property owner is obligated to send a 1099-MISC to the property manager for the $1K commission. Remember that if the property manager is a corporation, the property owner is relieved of the obligation to issue a 1099-MISC to the property manager for the commission.
