I'm not sure where you got advice on your current business plan, but it is not good:
- You indicate you have a residential real estate partnership, but no real estate in the partnership?
- In order to have a true partnership there needs to be a business purpose and like any other business entity there must be an intent to be profitable.
- The partnership can't pay expenses related to property it does not own.
- The partnership seems to be more of a rental agent.
- However, this doesn't make sense for the owner of the property
- Why would an owner give up 1/2 of the rental income
- In addition, if audited, I believe the IRS would collapse the structure as this appears to be shifting income; which in this case is not good.
- So to answer your second set of questions:
- The partnership cannot take any expenses related to the ownership of the real estate property
- The partnership, as mentioned by @DianeW777 , is eligible to take expenses related to the business of the partnership. As noted above, the expenses would be more along the line of what a rental management company does. This does not, however, include rental income
- The owner of the property should be reporting all income and expenses related to the property and then any management fee the partnership may be charging
- You need to get some professional tax advice before you go much further down the line with this enterprise.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
