Do I need both TurboTax Premier and TurboTax Business for: 2 current Rentals, 1 Rental 1031 Exchanged to 3 DSTs, and a Partnership LLC?

[jamie-m-todd]

I have been using TurboTax Premier for the last 10+ years, mainly to support our 3 rental properties.  We made some changes in 2022, in which we sold 1 of the rental properties, and using a 1031 Exchange, converted that to 3 DST investments.  Additionally, we sold the property to an LLC that was setup by us (as members) so that we could work with a developer (also a member) to build a spec house to sell sometime in 2023.  The LLC was setup as a Partnership.  The 1031 Exchange completed while the home was still in the state of a rental property (original structure). My wife and I took out a construction loan to finance the build project, which was done outside of the LLC.

Our questions are as follows:

 - Can TurboTax Premier support the 1031 Exchange and the 3 DST investments? 

 - The rental property used in the 1031 Exchange was not fully depreciated.  How do we carry its depreciation to the 3 DST investments?

 - Do we need TurboTax Business to support our LLC, in which we need it to generate a Schedule K that is required as part of our personal taxes?  What sort of information would go into the TurboTax Business/ Schedule K - as no financial gains have been realized at this point.  The only activity the LLC has performed is purchasing the rental property, and undergoing construction - both of which are using funds from our personally financed construction loan (outside of the LLC).  

 - Can we upgrade from Premier to Live Premier if we determine that we need assistance to complete our taxes.  We have always installed TurboTax on our PCs using a CD, not using the web based version.  Can we still upgrade to Live Premier as an incremental cost - paying the difference between $69 for the Premier CD and the $139 for the Live Premier service - which would be paying an additional $70 - or do we have to pay the full $139 in addition to the $69?

Any assistance or insight would be greatly appreciated!

[AmyC]

1. Premier supports Form 8824 to handle the 1031 exchange. DST is not an issue.

2. You will allocate it among the 3 properties. I have an example for two properties and entry help here.

3. Yes, to generate the k1 forms needed, use TurboTax Business. You will answer the questions in the program. Here is my favorite IRS website to help: Small business.

4. You can easily upgrade to  live assistance when using the online version. It is not available for the cd/download version. 

The cheapest method if you already purchased the cd:

You can start in the online version and if you need help, upgrade. If you don't need help, save the tax file to your computer and use your cd to finish up and file. See How do I switch from TurboTax Online to the TurboTax software?

[jamie-m-todd]

Hello Amy,

Thank you for your detailed response!

I do have a couple of follow-up questions in regards to filing for our LLC partnership, especially after reading the Legalzoom article as shown below - "Filing Requirements for an LLC Partnership": 

1) They do not mention a Schedule K, but do mention a 1065 tax form.  Are both of these required?

2) Could we classify ourselves as an LLC without business activity in 2022, and thus our LLC partnership does not have to file a partnership tax return for 2022?  Our LLC has not received any income for 2022, as that will only come with the sale of the spec house sometime in 2023.  In terms of expenses, do either of these activities count as expenses that should be claimed in the 2022 year:  1) members of the LLC contributed 20% cash for the construction loan down payment - around $400,000, 2) the construction loan, in which my wife and I are guarantors on the note, purchased the property for $790,000, and the loan has paid for approximately $700,000 in construction costs.  In the context of having an LLC partnership setup to specifically build/sell a single spec house, does it even make sense to claim these items as expenses in the 2022 year (if these are indeed seen as expense items), when the house will not be sold for a financial gain until sometime in 2023?

Please let me know your thoughts.

Thanks so much!

Jamie 

Filing Requirements for an LLC Partnership

An LLC that is taxed as a partnership is subject to the same federal income tax return filing requirements as any other partnership. The LLC must file an informational partnership tax return on tax form 1065 unless it did not receive any income during the year AND did not have any expenses that it will claim as deductions or credits.

Thus, an LLC with no business activity that is taxed as a partnership is not required to file a partnership tax return unless there are expenses or credits that the LLC wants to claim.

[DavidD66]

A partnership is a pass-through (or flow-through) entity.  A pass-through entity refers to a business that does not pay income tax of its own. Its income, losses, credits, and deductions “pass-through” to each business owner’s personal tax return, where its profits are taxed according to each owner’s individual income tax rate.  A partnership files an annual tax return - Form 1065.  The  income, losses, credits and deductions are reported on Forms K-1, which are prepared and filed with IRS as part of Form 1065.  There is a Form K1 for each partner, which reports that partner's share of the partnership's income, loss, credits, deductions, etc.  The partner then reports the K-1 information on his/her personal tax return.

If your LLC/partnership purchased real estate and has a construction loan, you do have expenses.  You will want to either file a return and report your expenses, or you may want to file a return and elect to capitalize (add to the spec house's cost basis) otherwise deductible interest, taxes, and other carrying costs by attaching a statement to your return indicating your election and the item or items included in the election.  

[Carl]

One thing not yet mentioned. So I'll mention it here.

TurboTax Business (different from Home & Business) is required to complete the 1065 partnership return. TurboTax Business is not available as an online product or for MACs. It's for the Windows operating system only. Last I checked, and @AmyC can confirm, live help (TurboTax Live) was not available for any of the CD/desktop products.

[Anonymous_]

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@Carl wrote:

.....live help (TurboTax Live) was not available for any of the CD/desktop products.

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Only LIVE Full Service is available for TurboTax Business (Forms 1065 and 1120-S).

See https://turbotax.intuit.com/personal-taxes/online/live/full-service/business-taxes/

[jamie-m-todd]

Hello David,

Thank you for all of those details!

In terms of your 2 suggestions below, my main goal is to offset the expenses from the spec house build in the same year that the financial gain is realized when the house is sold - which would be 2023.  Is this even possible given my situation?  

Living in California with a progressive tax rate factors into this objective.  The house is being built and will be sold in Colorado, by the way.  So I'd imagine I'd have to pay any profit to Colorado - at its state tax rate (e.g., 5%) - and then pay the remaining tax difference up to whatever tax tier I fall within for California (e.g., 13%).  So if I have a $100,000 profit, I'd owe $5,000 to Colorado, and $8,000 to California (13% - 5% = 8%).  I'd of course still have to pay the Federal taxes too.  Is this the right train of thought?

Thanks,

Jamie

"You will want to either file a return and report your expenses, or you may want to file a return and elect to capitalize (add to the spec house's cost basis) otherwise deductible interest, taxes, and other carrying costs by attaching a statement to your return indicating your election and the item or items included in the election."

[jamie-m-todd]

Hello Carl,

Can you please tell me if this is correct.  I spoke with someone who worked in the Turbo Tax case support group and they said that if I enroll in the online Live Premier program (to handle my personal taxes) that the CPA can/will also assist if I have any questions specific to the LLC partnership tax filing - using the TT Business product.  Is that true?  The $999 fee of enrolling in TT Business Full Service isn't financially feasible.  

Thanks,

Jamie 

[Anonymous_]

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@jamie-m-todd wrote:

...they said that if I enroll in the online Live Premier program (to handle my personal taxes) that the CPA can/will also assist if I have any questions specific to the LLC partnership tax filing - using the TT Business product.  Is that true?  The $999 fee of enrolling in TT Business Full Service isn't financially feasible.  

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Frankly, I would suggest that you contact Support again and re-verify that information because it does not sound correct.

There is a reason they charge $999 for Full Service (and may offer LIVE assisted for $499).