I transferred a rental property to an LLC after consulting with my current lender they approved. The LLC has two members, my wife and I. We don’t live in a community property state but the property and LLC is in a community property state. Would this be considered a disregarded entity based on the location of the LLC and property? If not, do I proceed in turbo tax as if I converted the property back to personal use and then do the business version for the portion of the year it was in the LLC?
It was deeded into the LLC in November so 2 months in 2020.
only if you reside in a community property state can a Husband and Wife LLC avoid filing a partnership return. you should file a partnership return - form 1065. failure can cost you as much almost $5,000 for each year not filed, (about $200 per partner per month late for a maximum of 12 months). for the first 10 months you file on schedule e page 1 as you always had done. the 1065 is for the 2 months the LLC owned the property.
even when not an LLC, a Husband and Wife jointly owned business is supposed to file a partnership return if only one spouse materially participates.
from 1065 instructions
A qualified joint venture conducts a trade
or business where the only members of the
joint venture are a married couple who file a
joint return; both spouses materially
participate in the trade or business, as mere
joint ownership of property isn't enough; both
spouses elect not to be treated as a
partnership; and the business is co-owned
by both spouses and isn't held in the name of
a state law entity such as a partnership or
limited liability company.
For a Partnership return (1065) you will need TurboTax Business. You can visit the following link to purchase the program: TurboTax Business.
TurboTax will take you through an interview to prepare the business return, similar to the personal (1040) products.
As part of preparing the 1065 return, TurboTax will prepare K-1 forms for each partner. You will need to enter the information from the K-1 into your personal 1040 return.
On the premiere side of turbo tax when I'm disposing the rental house I get taken to this section where it lists my assets. It lists the house, then a refi in 2016 and another in 2017. I followed instructions from another post in this community where you select Special Handling and it seems to all go well. I'm not sure what to do when I get to the "Depreciation Deduction Amount" section.
"We'll transfer this amount to the correct form for you.
In addition to the $248, you still have an additional $4,765 of refinance fees from your prior loan. You can still use these as an expense for ths year as long as the new loan was not with the same bank as the prior loan. Enter this amount as other expenses for this rental. We can do this in the expense section of interview."
I have 2 options. The first one shoots my refund up so much I'm sure something is wrong. I haven't tried the 2nd option. Neither times I refinance was the lender the same if that matters. I presume I need to pick up my depreciation where I leave off here when I start my Business version process for the 1065. I have not started that process yet.
Transfer these fees for me to Other Expenses
I'll enter these fees on my own later/ I refinanced with the same lender.