I own Rental Property and the property manager collected the rents and paid property expenses. He kept all the money and paid me nothing. How do I show this on my taxes?

[sohooma]

I own 10 LLC's that control 40 single family rental properties. The property manager rents the units, takes deposits, collects the rents and pays the property expenses. He is supposed to take 10% of income as his commission. For the entire year of 2015, he paid me nothing! How do I do my 2015 taxes? I have filed an extension, but October 17 is coming up rather quickly. One individual suggested I give the prop. manager a 1099 for all the income that he kept; but it doesn't seem right. That would show that I actually received the money and paid it to them. I didn't receive anything. This case is ongoing in court right now, but the court is not concerned at this time about my tax question. Do I, or do I not have income to report?

[Carl]

"One individual suggested I give the prop. manager a 1099 for all the income that he kept; but it doesn't seem right."

It is exactly right, as you will then have zero taxable income. However, consult with your tax attorney/legal advisor first, since this is an ongoing case in court. Sending a 1099-MISC will without a doubt, jeopardize your case in court. As a matter of fact, you should NOT under any circumstances take ANY advice from this public user to user forum, as it could potentially impact your ongoing court case. You need to take the advice of your attorney or tax pro that you can look in the eye and hold them LEGALLY AND FINANCIALLY liable for the advice they give you. You DO NOT have that option when you take advice from this public user to user forum.

[sohooma]

Thanks Carl, for the quick reply! I'm just looking for options at this point. My sending out a 1099-MISC would lead one to believe I actually have income from the properties. But I didn't receive anything. That is my dilemma. To be honest, it was the Prop. Mgrs. requirement to give me a 1099 detailing what he paid out to me. He didn't provide one. And he didn't pay me. I asked on several different occasions through his attorney to provide the 1099 and his attorney said that there wasn't one. I just want to do my taxes. There won't be any decisions until 2017 or later by the court. The court appointed a receiver (first time in 42 years) to do the property manager role, which the current Prop Mgr refuses to acknowledge. He has been charged twice with contempt. It's a long story!

[SweetieJean]

@Carl  Should this thread be closed?

[sohooma]

Not yet. If anyone one else has any additional options, I'd be interested to hear them. Thanks

[SweetieJean]

No one here can give legal advice. This is just a public forum.

[sohooma]

SweetieJean, I understand that. But sometimes the simplest answer is all that's needed. I tend to overthink stuff. So I'm trying to change that tendency to overthink and look for the simple. Thank you though for the reminder.

[Carl]

You're playing on dangerous and potentially expensive ground here. It's cheaper to pay someone you can hold liable for their advice and actions. Otherwise, the fines penalties and late fees can bankrupt a business before it even gets off the ground. The IRS does not play games. They just take all your game pieces and you have no say in the matter. Seek legal advice from a professional. Looking for it from armchair lawyers such as those of us in this public forum, is just to dangerous, financially.

[Critter]

First I agree .... talk to your lawyer and if you don't already have a tax attorney to help with your income tax return I HIGHLY recommend you get one of those as well and let them direct you in the matters of an income tax return.   You may need to file your return without the rental income and amend later but again seek qualified local council.  Technically you did have income & expenses on the properties, the fact that the net was not put in your pocket due to the embezzlement doesn't change that fact however how to handle the theft is another matter so heed your attorney's advice.

[Critter]

Again may I point out ... you really need 2 attorneys if the one you have doesn't specialize in income tax matters. As much as you may not want to spend money on 2 it would be wise to do so to protect your assets.

[sohooma]

I got it! You all are right. I guess there is no simple answer. Thank you for your responses and I will be seeking a tax attorney first thing in the morning.