I transferred my personal real estate to LLC in middle of year and how should I report on schedule E? Do I just report everything on one property?

Forum|Forum|2 years ago
April 8, 2024
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Best answer by elkiandart

Thank you DianeW777.

I transferred my rental property in July 2023. Do I report the whole year’s rental income and expenses on one property address on schedule E? Or do I need to split into two properties with same address? Like first property address is from January to June and click dispose because I transferred personal property to SMLLC. Then create another property with same address from July to December and click acquire this year. Thank you for any help in advance.

DianeW777

It depends. If you are a single member limited liability company (SMLLC) you would continue to file a Schedule E. SMLLCs are considered disregarded entities separate from their owners. This is because the IRS expects the taxpayer to carry the income onto his or her personal tax return using the Schedule E for rental real estate.

If you have more than one rental property, you can choose to treat them as one property, although the choice is yours if you have a good method to remove one if one is sold. This will not be an issue if you enter each asset separately. This way when one rental is sold, it could be easier to sell in the tax return without a lot of manual entry intervention.

There could be passive activity losses (PALs) to consider as well. These would be netted on Form 8582 and the carryover, if any, should be the same whether you combine them on one Schedule E/rental or separate them.

Please update or clarify if you converted your LLC to a partnership or an S-Corporation.

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elkiandartAuthorAnswer

Thank you DianeW777.

DianeW777

No, you should leave it in tact as it is. The reason is that the rental has 'relationship rules' attached which simply means that you had control before, you have control now and the property does not change it's position (cost, depreciation, date placed in service, etc). The depreciation does not change regardless of how you put it in.

Related Persons in Tax Law (IRS Publication 925, page 22)

The date acquired does not change and the date placed in service does not change. You can rename the property and keep the date of change in your tax return notes.

@elkiandart

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