An LLC is created, purchases a property mid-tax year, makes it available for rent (posts online), but does not get any tenants in the first few weeks. The LLC realizes the property needs a renovation to be competitive and starts that process, making the property temporarily idle (out of service for repairs and improvements), completing the renovation in the following tax year.
For that first tax year, the LLC will show no income (no tenants), but a number of deductible expenses (utilities, mortgage interest) and depreciation.
1) Despite not having income in the first tax year, can the LLC take the deductions, as the property was made available for rent?
2A) In that multi (2)-member LLC, will form 8825 be used (not schedule e), ultimately showing a "net rental real estate loss" on the 1065 partnership return? K-1s are given to the members.
2B) Can that loss be carried forward in the following tax year to offset subsequent rental income despite the LLC members being high-earners (triggering passive activities phaseout rule)?
Thanks!
