Co-Owned Property. Rented to other owner - Guidance on Income, expenses, deductions, depreciation

Forum|Forum|6 years ago
February 9, 2020
1 reply
11 views

Two brothers inherited the property. One brother still lives in the property. The brother who does not live there sets rent prices, collects, rent, pays utilities and all bills. Two rooms + Garage are rented out.

How should this be reported?

What percentage should be reported as personal use?

What percentage of income and expenses be reported?

How should this be depreciated? What is the basis of the property?

50% of the original basis of the property?

MaryK4

Level 15

If only the two rooms and garage are rented, you would have to prorate the space, then decide how to allocate the rent and expenses- if for example, two thirds of the home are occupied by the brother, then you would use the 1/3 of expenses, depreciation etc. As co-owners you could decide how to divide the income and expenses and report on the Schedule E. The basis of the property for depreciation would be the fair market value on the date of the decedent's death or when put into rental use.

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Chung11358

Level 4

I have the rental house with 4 owners of this rental house and when I input the depreciation expense worksheet, the number did not divide by 2 or 4 for difference owner. Please help me what should I do on the Turbo taxes software. other expense was divide by % and only the line 18 depreciation expense were not divide to %.

Carl

Level 11

@Chung11358 you need to start your own thread on your specific situation. It is not the same as @contentment who started this thread.

I suggest that both of you quit trying to deal with this on SCH E of your personal 1040 tax return. You are all just creating your own nightmare and you don't need to do that. Instead, use TurboTax Business (different from home & business) to complete and file an IRS Form 1065 Partnership Return. All rental income/expenses will be dealt with and reported on the partnership return.

Once the partnership return is completed, the partnership will issue each owner an IRS Form 1065-K1 showing each partner's share of income/expenses. Then each partner will enter the K-1 on their individual 1040 tax returns.

After you enter the K-1 information into your personal tax returns, all related related stuff will show up on page 2 of the SCH E that is a physical part of each of your personal 1040 tax returns.

TurboTax Business is not available as an online product or for MACs. It's for the Windows operating system only. Get it at https://turbotax.intuit.com/small-business-taxes/

While you may think it's a bit on the pricey side, it's an absolute pittance compared to the never-ending nightmare that all partners are risking if you try reporting your share separately on your individual 1040 tax return. If just one partner does something wrong on their individual 1040 trying to report their share, the potential for it to result in an IRS lash back to all partners is fairly good.

For @contentment since you have an owner that's actually using the property as their primary residence, you'll find that significantly simpler to deal with on a 1065 Partnership Return.