New LLC, 3 members, no revenue only capital expenditures in commercial building & land. Are we required to file 1065 & K-1's with zeros?

Forum|Forum|7 years ago
June 1, 2019
5 replies
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Started a new LLC, three members, we purchased an industrial warehouse that needs a lot of work. There's no income only capital investments. It will be at least next year before any leasing income. My question is do i need to file a 1065 and k-1's showing zeros for this start up year? IRS Form 1065 instructions say under "Who Must File:..Must file UNLESS it neither receives income nor incurs any expenditures treated as deductions or credits for federal income tax purposes".

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Best answer by Rick19744

Well I am impressed that you at least pulled the instructions to the 1065 and began to read them. Nice job.

I am summarizing your facts below to reach the conclusion that I don't believe you need to file a 1065 for 2016:

Purchased property that is being updated and is not ready to be leased - property is not placed in service and will not be placed in service in 2016, and as such, will not be depreciated. All costs will be capitalized.
May incur some organizational costs (Section 709) or start-up costs (Section 195) - these costs are capitalized and are either deducted (as allowed) or amortized (as allowed) when you begin your trade or business. You have not begun your trade or business. Ordinarily, a partnership begins business when it starts the business operations for which it was organized. Regulation 1.709-2(c). You have not met this standard.
In both of these cases, you have not received any income nor incur any expenditures treated as a deduction for federal income tax purposes.
Note that it is interesting that this "filing" requirement is different than that of an S corporation, but that is what the instructions tell you.
This language is still currently in the 2016 draft version of the form 1065 instructions https://www.irs.gov/pub/irs-dft/i1065--dft.pdf?_ga=1.253676170.286459965.1455758446

If the above continues to hold true, I don't believe you have a 2016 form 1065 filing requirement.

S

SweetieJean

Employee

Didn't you incur expenditures when you bought the warehouse?

ScruffyCurmudgeon

Employee

Even if there were no other expenditures the acquisition of a fixed asset in real estate kicks off depreciation schedule.

If this posted response is useful to you, please click on the upraised hand in the lower left of this post. Thank you. Scruffy Curmudgeon--PFFM/ IAFF, retired FireFighter/Paramedic - Locals 718/30, Veteran USAR O3 AIS/ASA '65-'67 NOT INTUIT EMPLOYEE USAR 64-67 AIS/ASA MOS 9301 - O3 - Just donating my time**Say Thanks by clicking the thumb icon in the lower left corner -it means nothing but makes those than answer feel wanted.

S

SweetieJean

Employee

For tax years beginning after 2015, the due date for a domestic partnership to file its Form 1065 has changed to the 15th day of
the 3rd month following the date its tax year ended. So, March 15, 2017.

Carl11_2

Employee

Yes, you are required to file. Yes, you will claim your expenditures which will most likely be startup expenses, not business expenses because you are not yet "open for business". No, your expenditures will not be deductible. They will be carried over to next year and deducted from income then. But if you don't claim them this year, then you can't carry over to next year.

Rick19744Answer

Employee

Well I am impressed that you at least pulled the instructions to the 1065 and began to read them. Nice job.

I am summarizing your facts below to reach the conclusion that I don't believe you need to file a 1065 for 2016:

Purchased property that is being updated and is not ready to be leased - property is not placed in service and will not be placed in service in 2016, and as such, will not be depreciated. All costs will be capitalized.
May incur some organizational costs (Section 709) or start-up costs (Section 195) - these costs are capitalized and are either deducted (as allowed) or amortized (as allowed) when you begin your trade or business. You have not begun your trade or business. Ordinarily, a partnership begins business when it starts the business operations for which it was organized. Regulation 1.709-2(c). You have not met this standard.
In both of these cases, you have not received any income nor incur any expenditures treated as a deduction for federal income tax purposes.
Note that it is interesting that this "filing" requirement is different than that of an S corporation, but that is what the instructions tell you.
This language is still currently in the 2016 draft version of the form 1065 instructions https://www.irs.gov/pub/irs-dft/i1065--dft.pdf?_ga=1.253676170.286459965.1455758446

If the above continues to hold true, I don't believe you have a 2016 form 1065 filing requirement.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

T

TaxGuyBill

Employee

I agree with Rick that you technically don't need to file. However, if the LLC filed for an Employer Identification Number (EIN), the IRS *MIGHT* send you a notice asking about why it didn't file a tax return. It is also hypothetically possible (but extremely doubtful) it could be audited and determined it DID have deductible expenses, and it would be subject to large late filing penalties.

Personally, I would print out a form from the IRS website and file it. It would only have the names, addresses, ID numbers, etc, and the Yes/No check-boxes filled out. Everything else would be zeros. Again, it seems like it would technically not required, but it MIGHT be easier to file a zero return than to deal with any possible IRS notices.