topic LLC was created in 2021 but no rental property was acquired. How do I file? in Business & farm

LLC was created in 2021 but no rental property was acquired. How do I file?

DrewHadLiam — Mon, 21 Feb 2022 16:51:57 GMT

LLC was created in 2021 but no rental property was acquired. State is Kentucky. We had minor expenses (e.g., attorney fees, LLC creation, etc.) but did not actually purchase property so we have no income.

I assumed I needed to submit through TurboTax Business but there does not appear to be an option to not enter a property. When attempting to do so it states "No Rental Property Entered."

How would I complete the federal and state taxes if we didn't actually acquire property?

Thanks!

Re: LLC was created in 2021 but no rental property was acquired. How do I file?

ColeenD3 — Mon, 21 Feb 2022 17:32:37 GMT

What type of LLC do you have? Single-member? If so, you can include start-up costs on Schedule C. Please see this LINK.

You said, "we". If there is more than one of you, taxation defaults to a Partnership.

If you are a husband and wife, you can't have a QJV, as you have an LLC and do not live in a community property state.

Definition of a Qualified Joint Venture

A qualified joint venture is a joint venture that conducts a trade or business where (1) the only members of the joint venture are a married couple who file a joint return, (2) both spouses materially participate in the trade or business, and (3) both spouses elect not to be treated as a partnership. A qualified joint venture, for purposes of this provision, includes only businesses that are owned and operated by spouses as co-owners, and not in the name of a state law entity (including a limited partnership or limited liability company) (See below).

Note also that mere joint ownership of property that is not a trade or business does not qualify for the election. The spouses must share the items of income, gain, loss, deduction, and credit in accordance with each spouse's interest in the business. The meaning of “material participation” is the same as under the passive activity loss rules in section 469(h) and the corresponding regulations (see Publication 925, Passive Activity and At-Risk Rules). Note that, except as provided in section 469(c)(7), rental real estate income or loss generally is passive under section 469, even if the material participation rules are satisfied, and filing as a qualified joint venture will not alter the character of passive income or loss.

Re: LLC was created in 2021 but no rental property was acquired. How do I file?

DrewHadLiam — Mon, 21 Feb 2022 17:46:04 GMT

Thanks for the response! This is a multi-member LLC with 4 people sharing ownership. My wife and I plus my sister-in-law and her husband. Based on your response below it's my understanding this would default to a partnership.

My thinking was I would need to file a Schedule K and Form 1065 through TurboTax Business so that I could then create K-1's for all 4 of us to file through our personal tax filings.

Please let me know if my approach is incorrect and the appropriate next steps.

Thanks!

Re: LLC was created in 2021 but no rental property was acquired. How do I file?

AliciaP1 — Mon, 21 Feb 2022 18:16:54 GMT

Yes, you qualify as a partnership in this case. Until you have income, you do not need to file a tax return. The costs you have incurred in the creation of the business should be categorized as an intangible asset, Start-Up Costs, and deducted as allowed once you start earning income.

For more detailed information see Business Start-up and Organizational Costs.