My brother and I own a rental property. Management company sends one 1099-MISC listing all rents in my name. How do we split rents/deductions between us?

[bluelavalamp72]

How do we let the IRS know that part of the rents should be in my brothers name?  Right now they would all be listed in my name and the data matching software would indicate I didn't report enough income if I only list half of the rent on my taxes.

[VolvoGirl]

Report half.  But you actually should be filing a separate Partnersip return 1065.

[TaxGuyBill]

To avoid an IRS notice:  Report it all, issue your brother a 1099-MISC for the other half, and enter the amount of your brother's 1099-MISC (half of the total) as a deduction.

[Critter]

In the future... get the 1099 in the partnership's name and file the proper partnership return.

[TaxGuyBill]

Joint ownership of a rental property doesn't necessarily need a Partnership return.

From the Partnership (Form 1065) Instructions:  "A joint undertaking merely to share expenses is not a partnership. Mere co-ownership of property that is maintained and leased or rented is not a partnership. However, if the co-owners provide services to the tenants, a partnership exists. "
<a rel="nofollow" target="_blank" href="https://www.irs.gov/instructions/i1065#idm140473051347216">https://www.irs.gov/instructions/i1065#id...>

[bluelavalamp72]

When listing the amount of my brother's 1099-MISC as a deduction, would the best place to put it be line 19 of Sch E - Other and state it's nominee 1099-MISC?  Thanks for the answer TaxGuyBill

[TaxGuyBill]

Yeah, that is what I would do.

[leighann1]

@TaxGuyBill what is your opinion if the 1099 is under my clients social but has both names on it? Do you think my client still needs to send a 1099 to his brother to shift the income? Well it is supposed to have both names on it but there was a glitch in the system and it has my client's social and the other brother's name twice but I know the IRS will be looking for it all on my client's return because of the social.

[Carl]

You and your brother need for form a partnership, and inform the management agency that all future payments are to be made to the partnership, and all future expenses are to be billed to the partnership.

A partnership files a physically separate 1065 partnership return. The partnership then issues each partner their own individual K-1 that shows the taxable income received by that partner, and they use that K-1 for filing their personal tax return.

If your state taxes your income, you'll need the K-1 information for your individual state returns also.

[TaxGuyBill]

Carl, read the my link above.  Shared ownership of a rental property does not usually require a Partnership.

[Bmomof6]

@TaxGuyBill 

TaxGuyBill:

Similarly 4 siblings own property in common which receives a 1099 MISC for rent.  The 1099 MISC is written to 1 sibling.  Can that sibling file a 1099 MISC to another sibling for the full amount   (and also, document this on line 19 of Schedule E)?  Must the 1st sibling file 1099 MISC before 2/28?  

Thank you so much.

[Hal_Al]

Yes, you can file a 1099-Misc, to each of the other siblings, but it is not necessary. 

Whether you give them a 1099-Misc, or not,  use line 19 of Sch E to document your deduction for their share.  Call your deduction "nominee recipient adjustment to 1099-Misc income" or something similar.  Do report all of  the original 1099-Misc amount on your schedule E, as rental income, so your Schedule E matches what's in the IRS computers.

[1NewMan]

Either a partnership needs to be formed or You can have your property management company split the normal distribution and send it to you both separately. The property management company can then send you both 1099 notices for the split payments distributed.

[MeltedIceCream]

Hi There,

This is extremely helpful. As a follow-up I am in a similar situation. I'll lay the facts below.

1. I am the sole person on the loan, but other co-owner is on title.

2. We plan to file half of the 1098 int/taxes on each of our own Schedule E's. However, that is the issue since Im the only person on the 1098. Is this the correct way to do things? If so, how should we do this?

Question (s)

1. Will both of us need to file the 1096 to elect the nominee status or just him? How does this work exactly and is there an example form to follow for people in this similar circumstance?

2. Am I allowed to e-file like this with Turbotax, or will I need to paper file?

Thanks in Advance! I haven't been able to find much information on this.

[RobertB4444]

When you're entering the information for your rental house you'll be asked by the TurboTax program whether you are the sole owner of the property or not.  Since you are not then you will select "no."  It will then ask you what percentage of the property that you own.  You'll say 50%.  At that point the program will offer to divide the expenses for you so that you can enter the full deductions and the program will divide by 50% for you.  You'll go through all the expenses for your rental in this way.  So will your partner.  E-filing is no problem.  But do maintain all of the records for the rental house showing the actual money spent on these expenses.