Changing Business type from rental income to income only

user17715400175 — Thu, 19 Feb 2026 22:40:39 GMT

My sister and I have an LLC that only holds a building with residential and commercial spaces. In 2024, we sold the building on contract. 2024's tax return included partial rental income and interest income. 2025 was only interest income (1099-INT). Do I need to change the type of business of the LLC? And if so, to what? I'm uncertain on how to proceed with the return.

Thank you for your help!

Carolyn

Re: Changing Business type from rental income to income only

AmyC — Fri, 20 Feb 2026 18:21:02 GMT

No, you did an installment sale, it is more than interest. No, you don't change your business type. Here is the breakdown:

Changing business type or type of income.

Business: Two people in an LLC, you are filing a business return for partnership, S corp or C corp. If you didn't file any paperwork to choose S or C, you are a partnership and should be filing partnership tax returns that generate a K-1 for each of you to put on your personal return.
Type of income: You did an installment sale in 2024 so it is no longer rental income it is income from the installment sale Form 6252 on your partnership return along with interest from the sale on your Portfolio interest.
Activity code for your business should change if this is your only property, maybe 531390 for activities related to real estate.

Putting it all together:

File your business return which includes:

interest income, Sch K, line 5
principal gain, the capital gain from the sale, Form 6252
principal basis, the part you paid originally that was returned to you, reported on Form 6252 and not taxed

Please look at your installment sale from 2024 to show you your basis claimed and the gain on the property. Reference it for your 2025 return. If you did not do an installment sale, amend your 2024 return, amend your k-1's, amend your personal returns.

Re: Changing Business type from rental income to income only

user17715400175 — Sun, 22 Feb 2026 19:04:01 GMT

Thank you so much! Very helpful. Carolyn

topic Changing Business type from rental income to income only in Business & farm

Changing Business type from rental income to income only

Re: Changing Business type from rental income to income only

Re: Changing Business type from rental income to income only