LLC - Rental Income vs. Ordinary Income

[tagteam]

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@AmeliesUncle wrote:
If you report it on the 8825, I suspect when you enter the K-1 on your personal tax return that it will be difficult to tell the program it is NOT passive income.

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I agree. This would essentially require entering false information, such as indicating the property is a self-rental.

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@AmeliesUncle wrote:
If you report it on page 1 of the 1065, it may be tricky to tell the program it is NOT subject to SE tax (it should not populate Box 14 of the K-1.

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I agree and this scenario is even worse since, I believe, it would require overrides in Forms Mode if Box 14 is populated.

[AmeliesUncle]

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@tagteam wrote:

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I agree. This would essentially require entering false information, such as indicating the property is a self-rental.

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If there are not any rentals on page 1 of Schedule E, I would go the Real Estate Professional route because that does not show up on the tax return (it just makes it non-passive).

[tccpg288]

I have a similar scenario.

The host does provide the services and has a 1065.

I am assuming this could qualify for active activity.

Would the activity be reported on the 8865 for each building then? Or on Page 1 of the return? Does all activity go in the 1065, or is some reported on Sch. C?

[Mike9241]

this is for schedule C but would apply to a partner who provides substantial services.

If you provide substantial services for the convenience of your guests,
your short-term rentals can be re-classified as a Schedule C business
activity subject to self-employment tax. For example, the operation of
the rental in similar fashion of a bed and breakfast will typically be
considered to be the provision of substantial services.

thus for preparing a partnership return the activities would not be entered on form 8825 buy on page 1 of the 1065. then this would flow to the k-1 as business income and also box 14 of k-1since it would be subject to self-employment taxes.

what if some partners are not active.  then an allocation would need to be made between page 1 and form 8825.

this is an opinion. I'm not citing anything authoritative.