However, a joint undertaking merely to share expenses is not a partnership. For example, co-ownership of property maintained and rented or leased is not a partnership unless the co-owners provide services to the tenants.
That does not in any way, mean you can't treat it like a partnership, and it does not prevent you from creating a partnership. Your reasons for creating a partnership is not "ONLY" for tax purposes to make the tax reporting simpler. That tax front is but a very small part of this - but an important one.
we do not provide services to the tenants.
So what? There is no requirement for a partnership to provide any services at all. Nothing says you "MUST" provide services.
For example, if you and I decide to create a partnership to buy raw land, sit on it for year and then sell it when it's value increases so we can make a profit on the sale, we can do that.As land becomes available at a price we're willing to pay, we start buying it up. Pure raw land with no structures on it at all. Then after holding it for a minimum of one year, we sell it - hopefully for a profit.
It's physically impossible for us to provide "services" to anyone, because "anyone" isn't utilizing the property for "anything". You and I own it and per our partnership agreement the land just "sits there" for a year and then we sell it. It's still a partnership and there's nothing that says we can't do it that way. (Though personally, I"d prefer at a minimum to form a multi-member LLC for such a venture if it will be more than a one-time thing.)
For you folks, the only thing that will be in the partnership is rental property. Therefore the only income produced by the partnership will be passive income and nothing else. (unless the members decide they want to expand the partnership to include other types of income.)
