topic Rental Property Conversion to LLC in Investors & landlords

Rental Property Conversion to LLC

Lee8 — Thu, 06 Jun 2019 13:25:30 GMT

Hello - I converted a rental property from personal ownership into an LLC this year. It has a number of depreciable assets (appliances, etc.) that are 2-3 years in service, and about a $26K passive loss carry forward. How do I convert the rental property in Turbotax from personal rental to LLC? There appears to be a place to show the $26K passive loss carry forward on the new business screen, but all options on depreciation are for a newly purchased asset which would start the depreciation clock over again. It has a separate EIN, so doesn't seem appropriate to keep it in the "Rental" category.

Is this a single member LLC ? Did you make the corporat...

Critter — Thu, 06 Jun 2019 13:25:31 GMT

Is this a single member LLC ? Did you make the corporation election ?

Yes, single member. It's the default "disregarded entity...

Lee8 — Thu, 06 Jun 2019 13:25:33 GMT

Yes, single member. It's the default "disregarded entity" - no corporation election.

Well then guess what ... since it is a disregarded entity...

Critter — Thu, 06 Jun 2019 13:25:34 GMT

Well then guess what ... since it is a disregarded entity you don't have to change anything ... it will be reported on the Sch E of your personal tax return just like normal. That new EIN is connected to your SS# and the IRS will expect it to be on your personal return.

Thanks Critter#2, that makes it easy

Lee8 — Thu, 06 Jun 2019 13:25:36 GMT

Thanks Critter#2, that makes it easy

Is the answer the same if it is a 2 member LLC??

Katy — Thu, 06 Jun 2019 13:25:37 GMT

Is the answer the same if it is a 2 member LLC??

Only if the 2 members are spouses ... otherwise you start...

Critter — Thu, 06 Jun 2019 13:25:39 GMT

Only if the 2 members are spouses ... otherwise you started a partnership or incorporated both of which you would have indicated when you got the EIN for the LLC.

Thanks. Does that mean the depreciation started over?...

Katy — Thu, 06 Jun 2019 13:25:40 GMT

Thanks. Does that mean the depreciation started over? i.e. a new 27.5 period? or can I continue the same depreciation schedule?

New assets to the partnership requires a new depreciation...

Critter — Thu, 06 Jun 2019 13:25:42 GMT

New assets to the partnership requires a new depreciation schedule using the adjusted basis of the converted property .... this is not an easy situation and I highly recommend you put the partnership 1065 on extension and seek local professional assistance to get this set up correctly and be educated on the return prep and bookkeeping needed.

Re: Rental Property Conversion to LLC

shubhron — Sun, 08 Mar 2020 18:00:27 GMT

Hi, Where did you put the 26K Passive loss carryforward in Business TurboTax?