Let's say there's no transfer of any securities from one LLC to the other. LLC1 doesn't have any securities, and LLC2 is formed with the capital contribution being securities owned by the members nothing to do with LLC1. LLC1 borrows from LLC2 to buy properties: seems straightforward for LLC1 to record the interest expense of that loan under 'interest' in Rental Real Estate Expenses Form 8825. My basic question, in the steady state case, also setting aside for the moment any distributions either LLC makes to members, how LLC2 would record the interest income on the loan to LLC1 and its interest expense on the margin loan that funds the loan to LLC1. As business interest income and expense on lines 7 and 15 of Form 1065? It the answer is pretty likely yes, it would be worth moving ahead to sort out other details. Thanks again.
