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bwsnyder2000
New Member

I own half of a rental house. Do I enter the whole rent tenants paid, or just the half that is mine?

TurboTax knows I own half, and says "We'll do the math" but that doesn't tell me the answer.  Also, TurboTax doesn't show you whatever math it's doing.  Let's say tenants paid $10,000.  I entered $5,000 in 'Rental Income' because that's my part of rental income. TurboTax then also cuts this wrongly in half? Or not? It doesn't show details.
9 Replies
VolvoGirl
Level 15

I own half of a rental house. Do I enter the whole rent tenants paid, or just the half that is mine?

Is this a duplex or a single house?  Who owns the other half?  You might need to file a partnership return for the rental.

ratings image
bwsnyder2000
New Member

I own half of a rental house. Do I enter the whole rent tenants paid, or just the half that is mine?

I own it with a sibling, it was the family home.  It's a single family house, not a duplex.  Not a partnership.  Family owned.

Mike9241
Level 15

I own half of a rental house. Do I enter the whole rent tenants paid, or just the half that is mine?

are the tenants related to either your sibling or you? if not, your sibling and you have a partnership regardless of the type of property you are renting.  the penalty for failure to file a partnership return is $400 a month for a maximum of 12 months for each year you failed to file.  siblings do not qualify for any of the exceptions to filing a partnership return.

Hal_Al
Level 15

I own half of a rental house. Do I enter the whole rent tenants paid, or just the half that is mine?

I'm of the opinion that you do not need to file a partnership return.  You can report your share of income and expenses on Schedule E.  I'm in a similar situation and that's how I do it.

References: https://turbotax.community.intuit.ca/community/investments-rentals/discussion/co-ownership-on-a-rent...

https://www.johnrdundon.com/co-ownership-of-rental-real-estate-does-not-require-partnership-formatio...

https://www.nolo.com/legal-encyclopedia/filing-your-taxes-when-youre-landlord.html

 

As to how you enter it; TurboTax (TT) can handle it either way.  I find it easier to just enter my half.  

Carl
Level 15

I own half of a rental house. Do I enter the whole rent tenants paid, or just the half that is mine?

Overall, if you just report the rental income/expenses on a 1065 partnership return, your life will be significantly easier and much simpler.

But if you want to report only your half on SCH E of your personal tax return, then do exactly that. Report *YOUR* half. Therefore, you claim 100% ownership and cut *everything* in half. So if the cost basis of the property is $10,000, your cost basis is $5000. If the rent received for the year is $12,000, your rent received is $6000.

When you elect to let the program "do the math" for you, the program can not do "all" the math. It's just not possible. Some if it you have to do yourself manually, no matter what. So to keep it simple,you might as well do all the math yourself, and just cut everything in half.

 

tagteam
Level 15

I own half of a rental house. Do I enter the whole rent tenants paid, or just the half that is mine?


@Hal_Al wrote:

I'm of the opinion that yo do not need to file a partnership return.   


I concur. 

 

...mere co-ownership of property that is maintained, kept in repair, and rented or leased does not constitute a separate entity for federal tax purposes. For example , if an individual owner, or tenants in common, of farm property lease it to a farmer for a cash rental or a share of the crops, they do not necessarily create a separate entity for federal tax purposes.

 

See https://www.law.cornell.edu/cfr/text/26/301.7701-1

 

See also https://www.irs.gov/pub/irs-drop/rp-02-22.pdf

 

tagteam
Level 15

I own half of a rental house. Do I enter the whole rent tenants paid, or just the half that is mine?


@Carl wrote:

Overall, if you just report the rental income/expenses on a 1065 partnership return, your life will be significantly easier and much simpler.


I am not tracking the above-quoted statement since filing a 1065 makes life more difficult and complex.

 

Among other things:

 

* An EIN needs to be obtained for the partnership.

 

* An extra return needs to be prepared and filed with the IRS and that return has a due date that is a month earlier than individual income tax returns.

 

* K-1s need to be issued and the partners have to enter information from their K-1s into their individual income tax returns and retain their copies (until the partnership is dissolved and a final return is filed).

 

* The partners need to keep track of their inside and outside bases for the point at which there is a sale of their interest in the partnership or partnership property.

 

* Generally, compliance costs are increased as a result of all of the aforementioned. 

 

The parties are really much better off by each entering their half on Schedule E as suggested by @Hal_Al.

 

 

Mike9241
Level 15

I own half of a rental house. Do I enter the whole rent tenants paid, or just the half that is mine?

Partnership
A partnership is the relationship between two
or more persons who join to carry on a trade
or business, with each person contributing
money, property, labor, or skill and each
expecting to share in the profits and losses
of the business whether or not a formal
partnership agreement is made.
The term “partnership” includes a limited
partnership, syndicate, group, pool, joint
venture, or other unincorporated
organization, through or by which any
business, financial operation, or venture is
carried on, that isn't, within the meaning of
regulations under section 7701,

 

Who Must File
Domestic Partnerships
Except as provided below, every domestic
partnership must file Form 1065, unless it
neither receives income nor incurs any
expenditures treated as deductions or
credits for federal income tax purposes.

 

 

the above is from the IRS instructions for a partnership return. it would seem your venture meets the definition of a partnership.  However, I will agree that many partnerships do not file returns as required but split the reporting.  it's your money and your risk

 

tagteam
Level 15

I own half of a rental house. Do I enter the whole rent tenants paid, or just the half that is mine?


@Mike9241 wrote:

the above is from the IRS instructions for a partnership return. it would seem your venture meets the definition of a partnership. 


Except the regulations under the same code section you mentioned state, essentially, that the co-ownership of property that is maintained, kept in repair, and rented or leased does not constitute a separate entity for federal tax purposes.

 

Regardless, there does not really appear to be much risk involved if the co-owners report their shares (income and expenses) on their Schedules E rather than from a K-1 (1065). The rental income and expenses would be exactly the same in either case. 

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