A partnership is a pass-through (or flow-through) entity. A pass-through entity refers to a business that does not pay income tax of its own. Its income, losses, credits, and deductions “pass-through” to each business owner’s personal tax return, where its profits are taxed according to each owner’s individual income tax rate. A partnership files an annual tax return - Form 1065. The income, losses, credits and deductions are reported on Forms K-1, which are prepared and filed with IRS as part of Form 1065. There is a Form K1 for each partner, which reports that partner's share of the partnership's income, loss, credits, deductions, etc. The partner then reports the K-1 information on his/her personal tax return.
If your LLC/partnership purchased real estate and has a construction loan, you do have expenses. You will want to either file a return and report your expenses, or you may want to file a return and elect to capitalize (add to the spec house's cost basis) otherwise deductible interest, taxes, and other carrying costs by attaching a statement to your return indicating your election and the item or items included in the election.
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