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Foreign Real Estate Investors

CuttingTaxes
Level 1
I have a new client who is a Canadian citizen and who lives in Canada. He has rental property here in the states that he owns with his brother who also lives in Canada. Their last year's return is a 1040 NR where they just split everything 50/50 income and expenses on schedule E and filed two separate 1040 NR. They both are on the title of the property. I thought they should be filing a 1065 US partnership return too? They have had the rental for 5 years now and the prior accountant never filed a 1065, just the 1040NR's. Should they also be filing a partnership return?
 
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itonewbie
Level 15

Joint ownership of a rental property generally doesn't give rise to the establishment of a partnership for federal tax purposes pursuant to §301.7701-1 and various rulings provided certain conditions are met.  These include, inter alias, co-owners holding titles as tenants in common and not treating the co-ownership as an entity.

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Still an AllStar
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