Schedule E - property information problem / challenge

Forum|Forum|2 years ago
December 16, 2023
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Two rental properties we own for a couple years were listed correctly on our 1040 schedule E. This year we contributed them as member capital to a newly formed LLC partnership.

CPA advice: cannot just delete the properties from our 1040 schedule E. Instead, have to explain to IRS what happened. To do that, the CPA advises leaving them on schedule E, clear all income, expenses and depreciation lines, but add notes to each property description, something like "Property contributed to partnership EIN xx-yyyyyy". IRS will have that partnership's 1065, and will see the properties' info continuing there.

The properties are listed / identified on schedule E part I, line 1a. Only physical addresses show up there.

Technical problem: no matter what I tried, Turbotax does not let me append a note to a physical address on that line. It insists on only legit physical addresses. Options:

1) Forget electronic filing. Leave schedule E as Turbotax creates it. Manually add the recommended notes on the printed schedule E page. File by mail.

2) Leave schedule E as Turbotax creates it. Add a separate statement explaining the situation.

Question here: how do I add an explanatory statement to schedule E in Turbotax (similar to the statement I can add to form 2210) ? Or do I have to just add a separate printed page and file by mail ?

3) Is there a better way to implement the CPA recommendation in Turbotax?

4) Is there a better or simpler way to deal with this case?

Mike9241

create a separate statement and attach it to your return that must be filed by mail. Turbotax can't handle non-standard statements. I can't say whether or not the IRS will read the statement.

your alternatives

1) is to skip the disclosure to enable e-file and then respond to any IRS notice.

2) on the location line leave the number and street. Follow with "transferred to LLC partnership"

used the city line for the portion that won't fit on the location line

for example: location line 281 apple transferred to

city line LLC partnership

note state and zip required so this is not perfect

on schedule E it will appear as follows (il state 60006 zip code)

281 apple transferred to, LLC partnership, IL 60006

*************************************************

To transfer rental property to a partnership, you need to file a statement with the partnership return for the tax year during which the distribution or transfer occurs. The statement must include the name and address of the partnership, and a declaration that the partnership elects under IRC Section 754 to apply the provisions of IRC Sections 734(b) and 743(b)

Critter-3

In the TT program, in the asset section, you will indicate these were converted to personal use to stop the depreciation. Then you will have the info needed for the cost basis you transferred to the partnership.

If you are working with a professional you may want to use them for the personal return this year so the required statements are filed properly ... professionals can attach statements to efiled returns.