Question

setting up llc disregarded entity for spouses

Forum|Forum|4 years ago
March 30, 2022
1 reply
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we have created an LLC for 4 rental properties, the LLC is owned by spouses in community property state so its considered disregarded entity. When i enter the LLC business information, if i select its owned by both husband and wife, it forces me to break into 2 businesses, each owned 50%. Since its supposed to be treated as sole owner for tax purposes, should i be entering it as if only one of us owns it? if i enter it as 2 50%, the QBI seems to be all messed up, unless i need to change more than that.

TurboTax Home & Biz Windows

D

DianeW777

You should enter two separate but equal activities.

As noted by you if you are in a community property state you can choose a disregarded entity and file a Schedule E for each of you by splitting income and expense. You would also have to split the cost of buildings, land for each building and any capital improvements as well as other assets such as appliances.

SMLLC IRS

If an LLC is owned by husband and wife in a non-community property state, the LLC should file as a partnership. LLCs owned by a husband and wife are not eligible to be "qualified joint ventures" (which can elect not be treated as partnerships) because they are state law entities. For more information see Election for Husband and Wife Unincorporated Businesses.

The qualified business income deduction (QBID) should be the same since it will be the net result for each of you on your separate rental activities. Make sure you are answering the question in both rental activities about the QBI.

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K

kgg2Author

So i'd have to split each of the 4 rental properties also? how would i even do that when they were first entered in 6-10 years ago and have been depreciating?

D

DianeW777

You can use the depreciation worksheet from last year and split everything in half (half the cost for each asset placed in service, half the land cost for the rental property and then the original date placed in service). Enter each asset, using half the cost, once under your own rental activity and then again under your spouse's rental activity. Use the original date placed in service for each one and the end results will be exactly the same as they are now. It will just be split equally between your two rental activities. TurboTax will know all the prior depreciation and the current amount for each of you.

This will make a seamless process for each activity and they will be equal just as you want them to be.

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