3 Part question on IRA/LLC and the corresponding Blocker LLC used for Crypto mining?

[M_Spence]

I formed a SDIRA/LLC which has two members (Traditional IRA and ROTH IRA) and the custodian is a Trust Co. in AZ. The multi-member IRA/LLC was formed in VA and owns a Cryto Mining LLC (Blocker Co., filing as a C Corp.) which was incorporated in OK. Mining equipment was purchased in March 2022 and should have been put in service in Tx in Sept. 2022 however, this has not occured as yet.

(1.) Since the multi-member member (IRA/LLC) is a VA LLC and I live in VA, does the Crypto Mining LLC need to file VA State taxes or OK State Taxes?

(2) What federal tax forms do I need to fill out to document the money that was spent on purchasing the crypto mining equipment which is yet to be handed over/energized?

(3) Confirm that I cannot start taking depreciation until the miners have been energized and start mining.

[RobertB4444]

1. The Multi member LLC files in Virginia and receives income from the C corpwhich files in Oklahoma.  If the C corp pays taxes in Oklahoma then that is all that needs to be done.  If the C corp passes the income through to the LLC then the LLC will need to file in Oklahoma as well.

2. The crypto mining equipment was purchased by the C corp which is where it will be depreciated.  What federal forms it should file depends on how you have set it up - it will either file form 1120 or form 1120-S.

3.  It should begin depreciation in the year of purchase.  You won't qualify for any bonus depreciation since you have no income from the equipment yet.

@M_Spence 

[M_Spence]

Thanks Robert, much appreciated.  Current plan is for the Blocker LLC to pay taxes (UBIT) and not pass through to IRA//LLC.  Will file using form 1120.  I was considering holding off on submitting any amounts for depreciation as the turn key vendors have so far not met their energization deadline and I'm not sure when they'll be able to do so.