Yes, you need to file a business tax return for a multi-member LLC for the first year the LLC was in business (actively pursuing the business objectives). This is especially true if the IRS assigned an Employer Identification Number (EIN), as the IRS expects to receive a tax return for every EIN.
You are correct that all costs related to preparing the property to be rented before it is placed in service are added to the basis of the property for depreciation. The only exception is interest expense for a mortgage that uses the property as collateral. Interest Expense is deductible over the term of the mortgage.
Startup Costs (up to $5,000) maybe deducted in the first year of your business. These are costs that prepare your business to generate income, before you are actually open for business. This includes expenses that would normally be deductible if the business was active.
The IRS defines “startup
costs” as deductible capital expenses that are
used to pay for:
1) The cost of
“investigating the creation or acquisition of an active trade or business.” This
includes costs incurred for surveying markets, product analysis, labor supply,
visiting potential business locations and similar expenditures.
2) The cost of getting a
business ready to operate (before you open your doors or start
generating income). These include employee training and wages, consultant fees,
advertising, and travel costs associated with finding suppliers, distributors,
and customers.
These expenses can only be claimed if your research and
preparation ends with the formation of a successful business.
Capital
assets that would normally be subject to depreciation may not be included as
startup costs. However, the current Safe
Harbor Election allows you to expense
capital assets costing $2,500 or less.
See this post on How to take the Safe Harbor
Election in TurboTax Business
You may have startup costs for the period before you "opened for business" and operating expenses since that date, even though you are not actively renting any properties.
In addition, you may deduct up to $5,000 of Organization Costs (generally legal fees related to forming & registering the LLC).
Additional Information
