How to enter a transfer of asset from SMLLC to myself

[AR_Tom]

I transferred a rental house (and associated fence and loan fees that were being depreciated or amortized) from a SMLLC to myself via quitclaim deed, and then a month later transferred that house via quitclaim deed from myself to a MMLLC. 
My question is: in TurboTax Business (the tax return for the SMLLC) how do I enter the transfer from SMLLC to myself? From what I have read, this should not be a taxable event. In TurboTax I went into "Dispose of Rental Real Estate Property". I have three assets: house, fence and loan fees. For the "house", I selected "disposed of by some other means" and it seems to work fine, i.e there was no loss or gain. But for the "fence" when I selected "disposed of by some other means", TT calculated a loss, which I think isn't proper. And for the "loan fees" TT didn't give me the option "disposed of by some other means" so I had to select "sold" but that's not proper either (and TT calculated a loss). So how can I properly enter the transfer of these assets in Turbo Tax so it doesn't calculate it as a taxable event?

[Critter-3]

Was the single member LLC filing as a corporation on an 1120-s?

[AR_Tom]

The short answer is "no"; the SMLLC never filed on 1120S. 

The complete answer is a bit more complicated (although I don't know if it is relevant). 

The SMLLC has previously filed Form 1065 because I thought that would be correct because I thought there were two partners. But since the other partner was my wife, it turns out that it is still considered a SMLLC. After filing the 1065 I received a letter from the IRS telling me not to file 1065 but "in the future, report the profit or loss on your individual income tax return." 

However, in 2020 (the tax year that I'm currently working on), after I transferred the rental properties from the SMLLC to myself, and then from myself to a new MMLLC, I added a proper partner to the SMLLC so it became a MMLLC; so I am filing a 1065 for both MMLLCs. The old LLC, which was a SMLLC at the time that I transferred the rental property to myself, is now a MMLLC that owns no assets - it just provides property management services. 

[Critter-3]

Since this is an unusual situation I highly recommend you seek local professional assistance so you get things done correctly.

From what you said you had a SMLLC that you treated as a MMLLC filing a 1065 which the IRS said was incorrect but you are going to continue the error by filing another 1065 to close the LLC instead of the Sch E on the 1040. 

Then you retitled  the property from your old   LLC to your name which was really not needed since a SMLLC is the same thing as you and it did not have to be done to retitle it to the new partnership (or S-Corp).

And then you contributed the rental to the new entity.

I don't know if you had to do this for mortgage regulations in order to transfer the property but I  think you did more than was really needed and you are continuing to make unneeded moves.  

This is why I once again urge you to sit down with a local tax pro ... if you are now filing the 2020 returns for partnerships or S-Corps then they are now very late and are accruing penalties  unless you put them on extension ... then you have until 9/15 to file.  

[Mike9241]

From an IRS standpoint a husband/wife LLC must file a partnership tax return except if the LLC is in a community property state.  so I disagree with this statement. 

The SMLLC has previously filed Form 1065 because I thought that would be correct because I thought there were two partners. But since the other partner was my wife, it turns out that it is still considered a SMLLC. 

[Critter-3]

No matter which state you live in if you got an EIN as a SMLLC then you just file a Sch E like normal as the SMLLC  is considered a disregarded entity for tax purposes  even if you file a joint return.  In fact putting a rental into an LLC is really useless if you were using it to "protect" yourself from law suits.  What you really need is a good insurance polity to protect your interests.  There may be other items the state needs  so PLEASE  seek local assistance to get educated on all these matters.  

[AR_Tom]

To simplify the question a bit: 
In TurboTax Business, how do I enter the transfer of assets from a SMLLC to myself without TurboTax calculating it as a taxable event? Using the "Dispose of Rental Real Estate Property" screen didn't work correctly (it worked fine for the house - zero gain or loss, but it calculated a loss for the "fence" and "mortgage fees"). 

[Critter-3]

The basic situation is you took the property out of service ... it was not sold.  Then you transferred the property to the new entity ... it was not purchased.   

I cannot tell you how to make all the entries you need to make in the TT Business version since I am not well versed with that program   and the limited assistance  you can get with TT technical support will not be helpful.  Anyone using the DIY Business program needs to know what they are doing or invest time learning how to do it correctly.   That is why I stressed that you should seek local council for this situation ... the penalties for late filing right now are more than you would spend with a paid tax pro who should be able to get them waived.  

[AR_Tom]

Does anyone know the answer to this question? 

In TurboTax Business, how do I enter the transfer of assets from a SMLLC to myself without TurboTax calculating it as a taxable event? Using the "Dispose of Rental Real Estate Property" screen didn't work correctly (it worked fine for the house - zero gain or loss, but it calculated a loss for the "fence" and "mortgage fees"). 

[AR_Tom · Accepted solution]

I managed to figure this out myself. In the TT screen where it asks how you got rid of the asset, if you say that you gave it away then TT will not count it as a loss or gain.