K1 loss deduction against single member LLC

[rajeesingh]

I have 2 single member LLCs. I am considering electing S Corp status for one or both.

I wanted to ask about potential depreciation losses that would be noted via K-1. Especially with the accelerated depreciation option, this makes real estate syndication attractive! 

Would I be able to write off K1 losses so long as my income was overall more than the loss on K1? Would the net operating loss need to have a K1 income from a business such as a formal S-Corp election or would the PASS THROUGH income from my LLCs be okay for me to take the deductions?  I am thinking it should be okay but if need K1 for that, that may motivate me to get this S-Corp election done yesterday! lol

[Anonymous_]

You mentioned "real estate syndication" but did not state the precise activities of your business.

Regardless, you might first want to do an internet search using the search terms "holding real estate in an s-corporation". It will be enightening.

Also, a couple of issues to bear in mind are (a) single-member LLCs do not issue K-1s (i.e., no pass-throughs such as multi-member LLCs/partnerships and (b) S corporations typically require that officers and shareholders receive a reasonable salary for their services to the corporation (which involves quarterly reporting). 

I will page @Rick19744 and for the balance.

[Rick19744]

Just to expand on a few items:

• While one should never say never, however, owning real estate in an S corporation is NOT a good idea.  Bad tax things generally happen at some point.
• We know too little about your current situation to provide much in the way of advice.
• Owning real estate is generally deemed a passive activity.  As such, losses are typically limited and suspended until income is generated or you have an exit event.
• Another exception would be if you qualify as a real estate professional for tax purposes.  This is best determined with a one on one with a tax professional.
• Discussing real estate syndication on a forum such as this indicates you are a long way away from understanding the complexity of this area.  Real estate syndicates are handled by large law firms and top accounting firms.

[AliciaP1]

While a single-member LLC can make the election to be considered an S-Corp for tax purposes only, there are certain criteria that have to be met in order to not end up paying large penalties to the IRS.  @Anonymous_ listed the most important one about payroll and reporting/paying payroll taxes.

@Rick19744 is also correct in that owning/renting real estate is generally a passive activity, assuming that is what you're alluding to in your post.

I would suggest you consider reaching out to a tax professional in your area for help and advice on your specific situation.