Husband & Wife filing jointly, LLC with two Schedule K-1 forms, Combining businesses (aggregation)

[ptorab]

• Husband & wife filing jointly
• Owning an LLC (unequal ownership 45%, 55%), named XYZ
• Working on entering two Schedule K-1 (1065) forms for the XYZ LLC (from TT Business)

When entering the second Schedule K-1, I get asked "Should XYZ LLC be treated as part of a combined business?", where "XYZ LLC" is listed as one of the existing options (from the first Schedule K-1 that was entered). Intuitive answer to me is yes, and then I select the listed XYZ LLC and asked to be combined with it (I've exercised this path, but haven't filed yet), which then asks me to explain why these "two businesses" are eligible to be combined.

It seems odd to me, that married joint filers who also jointly own an LLC need to explain why their "two businesses" can be combined (for better QBI deduction I assume). Does this sound right? Is this the expected way to enter this information. This should be a common scenario for many.     

[Critter-3]

You are over thinking this ... the program will ask this for everyone since the program is used by many folks with different circumstances and it cannot assume anything.  What if the K-1 forms came from different businesses ... aggregating may not be advised or wanted so the program asks everytime.  Just indicate yes if you wish them to be aggregated and move on. 

[ptorab]

Still doesn't sound right. This leads to Schedule B (Form 8995-A, "Aggregation of Business Operation"), and name of business changes to "Aggregation 1" instead of simple XYZ, LLC. I doubt someone who is not using TT to file will end up with this structure.

Anyone else care to comment. What's the proper way to file with a jointly owned LLC in or outside TT.

[Digger01]

I respectfully disagree with Critter-3 on this matter. The OP's case is one of a single business that is co-owned by two people. One presumes that each of the two relevant K-1's feature identical business EIN's, along with other business-related credentials.

Why would it make sense to combine each owner's portion of the same business? There is only one business under consideration - how can it be "combined" with itself?

[Mike9241]

sometimes aggregating will produce a larger QBI deduction other times it will be lower and at other times it makes no difference. I see no purpose in aggregating non-rental activities unless the QBI deduction is larger. Frequently, rental real estate is aggregated so that the safe harbor rules to treat rental real estate as a trade or business are met. Once businesses are aggregated, this must continue in future years unless a trade or business no longer qualifies for aggregation. 

since we know nothing about the partnership, you must determine whether aggregation, if beneficial ur desired, is allowed.

the rules for aggregation are spelled out in IRS Reg 1.199A-4

see this article about aggregation especially the aggregation criteria section

https://www.thetaxadviser.com/issues/2019/may/sec-199a-aggregation-trades-businesses.html