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- New SMLLC set up for Rentals, depreciation report development
New SMLLC set up for Rentals, depreciation report development
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Mel7777
Level 3
a month ago
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Hello!
I have a client who has two rentals. 2023 reported on Sch E. In 2024 set up an SMLLC and is actively renting property as a business and separately sells homes as a real estate professional. Given the new SMLLC and the purpose of renting property as a business, it seems the rentals should be on Schedule C. Do you agree?
If so, do you recommend setting up each rental as it's own Schedule C (with same EIN) so that the depreciation schedules can be kept separate by property? Or is there a way to create groupings on the depreciation schedule such that the improvements and property 1 can be separated from improvements and property 2?
Thank you for your input!
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3 Comments 3
sjrcpa
Level 15
a month ago
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The SMLLC is disregarded for income tax purposes. Tax return reporting is as if there was no LLC. Rentals continue to be reported on Schedule E.
The more I know the more I don’t know.
Mel7777
Level 3
a month ago
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Yes, I understand the disregarded entity. However, as I report on Schedule E the loss is disallowed so even though he's in the business of renting properties, the loss needs to be deferred?
TaxGuyBill
Level 15
a month ago
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@Mel7777 wrote:
Yes, I understand the disregarded entity. However, as I report on Schedule E the loss is disallowed so even though he's in the business of renting properties, the loss needs to be deferred?
Unless he qualifies as a Real Estate Professional (under the specific tax-definition) and also Materially Participates in the rentals, it is usually still passive and the losses would usually be suspended.
Short term rentals (average rental period of 30 days or less), or rentals where the tenants are provided "services" (such as maid service or meals) may be treated differently with different results. If either of those apply, please give us details.
