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June 5, 2019
Question

Can I deed properties in my name, claim income to LLC, and write off LLC business expenses?

  • June 5, 2019
  • 12 replies
  • 0 views

My business is buying rental property.  I deed properties in my own name.  The rent is deposited to the LLC bank acct.  Can the LLC claim the income? The reason I care is that there are lots of business expenses (office equipment, vehicle expenses, etc.) that I'd like to write off, but it looks a bit fishy if my LLC shows no income.

You might say that I should write these items off on my Schedule E on my personal tax return.  Many write offs don't fall under a specific property address that I own, but rather are general expenses required to research, acquire, and rent property.  How do I write off "business" expenses for a business that has no income?

12 replies

Employee
June 5, 2019
Is this a Multi-Member LLC (Partnership)?  Or is it a Single Member LLC?
Has the LLC made any elections to be taxed as a corporation?

Your post indicates you are using the "Business" version, which is for Partnerships and Corporations.  Is that correct?  Or are you preparing your personal tax return?
Critter
Employee
June 5, 2019
I HIGHLY recommend you seek a qualified bookkeeper & tax pro to get you set up correctly since these are confusing subjects and getting them wrong can cost you big time later.
snwigginsAuthor
June 5, 2019
Thanks for the responses.  TaxGuyBill, yes I am using the "Business" version.  SweetieJean, no, that is not related to this question.  Critter#2, yes thank you, I do need tax pro advice... which is why I started asking here.  So far nobody has attempted to answer my actual question....... anybody else?
SteamTrain
Employee
June 5, 2019
They can't provide any guidance about what you might need to do until you answer TaxGuyBill's question about

1)  whether it is a muti-member LLC/partnership with other people ....or just you  (or just you and wife)
2) whether the LLC made any elections to be taxed as a corporation?
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
snwigginsAuthor
June 5, 2019
Ahh - thanks.  The LLC members are simply me and my wife.  The LLC has not made any elections to be taxed as a corporation.
SteamTrain
Employee
June 5, 2019
that should help.
..I'm not particularly useful in this area...but someone or @TaxGuyBill should answer by the end of today
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
Employee
June 5, 2019
What state do you live in? That makes a difference for LLcs where the only shareholders are spouses.
snwigginsAuthor
June 5, 2019
I live in Alabama, but the LLC is formed in Delaware.  The properties I own are in Alabama, Kentucky, and Florida.
Employee
June 5, 2019
Neither Alabama or Delaware is a community property state.  That means that your 2-shareholder LLC must report and pay income taxes separately on form 1065 (unless you elect to be treated as a corporation and file form 1120).  The LLC tax return issues K-1 forms to the shareholders who enter those forms on their personal tax returns.

You can't treat the LLC as a disregarded entity and file using schedule C.

How that affects the proposed transaction, I can't tell, but it may affect the other answers.

One comment I do have is that the IRS uses a substance over form doctrine when auditing.  If a transaction is designed purely to look like one thing when it really does another, the IRS will tax you based on the other thing (the substance) and not the official form, especially when the form evades taxes.

I think the answer is, you're doing it wrong.

If you own the properties but don't collect income, then you have no way to write off expenses on schedule E.  And if the LLC collects the rent but doesn't own the property, then it has income but no expenses.  (The LLC could pay for repairs and other expenses but can't take depreciation.)

Why are you doing it this way?  Why not own the properties in your own name and collect the rent in your own name; or, sell the properties to the LLC and have the LLC collect the rent and pay the expenses?

Potentially the LLC could lease the property from your and then sub-lease it to the tenants, but I think you need more professional advice on that--remember that free advice on the internet is worth exactly what you pay for it.  Many people on this board are very knowledgeable, but don't expect us to stand with you if you are audited or if you discover that a particular transaction form leaves you in the lurch.