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April 2, 2025
Question

CONVERTING SOLE PROPRIETORSHIP TO 2MBER LLC FORVA RENTAL BUSINESS

  • April 2, 2025
  • 2 replies
  • 0 views

How do you convert a sole proprietorship doing residential rental business to an LLC

 

    2 replies

    VolvoGirl
    Employee
    April 2, 2025

    You will have to do the 1065 return from scratch and enter the rentals again.  You can't transfer from  your schedule C to the separate Business program.  You will need to close the business in your personal return.

     

    You need to buy Turbo Tax Business, not to be confused with the personal Home & Business version. Home & Business is just for personal returns that need schedule C for self employment.  You can have the Business program and a personal program installed at the same time.  


    You can buy the stand alone do it yourself Business Download program for Windows here (it is not available to do online or for Mac).
    https://turbotax.intuit.com/small-business-taxes/cd-download

     

    cynbu2002Author
    April 2, 2025

    Where can I input the 1098 mortgage interest statement of the rental properties in 1065

    April 2, 2025

    I strongly recommend that you seek professional help if either or both are putting pre-owned real estate into the partnership. I don't think this is a do-it-yourself situation. Hopefully, this is something for 2025. For 2024, a partnership return was due 3/17/2025. Penalties for late filing are about $200/month per partner, though the IRS usually will waive 1st year penalties if requested. 

     

     

    here are some of the rules if real estate is being contributed

    Contributions to the Partnership
    Generally, no gain (loss) is recognized to the partnership or any of
    the partners when property is contributed to the partnership in
    exchange for an interest in the partnership. ..........If as a result of a
    transfer of property to a partnership, there's a direct or indirect
    transfer of money or other property to the transferring partner, the
    partner may have to recognize gain on the exchange.
    The basis to the partnership of property contributed by a partner
    is the adjusted basis in the hands of the partner at the time it was
    contributed, plus any gain recognized (under section 721(b)) by the
    partner at that time. See section 723 for more information.
    See Regulations sections 1.721(c)-1(b)(7) and 1.721(c)-3(b) for
    more information on a gain deferral contribution of section 721(c)
    property to a section 721(c) partnership. Also see Section 721(c)

    there are other rules to deal with if contributed property is eventually sold.

     

     

    if real property is being contributed, consider the cost of retitling the property in the name of the LLC. if the property is mortgaged, transferring it to the LLC may be deemed a sale, possibly making the entire mortgage balance due immediately.