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Partnership for rental but 100% goes to one partner. Can this be reported without a K-1 and with Sch Es on her tax return?

The kids set up an LLC partnership for each of the 3 rentals their elderly mother owns (with a separate EIN for each)  but she wants to just put them on her tax return as she has done for 30 years.  All of the income/loss will be going to the mom 100% (at her request).  Can I just put them on her tax return as schedule Es and not worry about filing 1065s for each of the rentals with K-1s?  The kids are good kids, I know them all, they were just trying to look out for their mom and also thinking about the future. 

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9 Replies 9
ehill
Level 4

If it is a single person LLC, it goes on the 1040 as a disregarded entity.  Look at the LLC to see if it is a partnership or not.

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jeffmcpa2010
Level 8

Are there any owners of the llc's other than Mom?

If yes you must follow the LLC agreement regarding allocation of profits and losses, or if nothing is specified than they must be allocated based on ownership.

If she is the only owner, than they go straight to Schedule E as disregarded entities.

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The certificate of organization shows 4 members but no %'s.  The letters from the IRS for all 3 rentals show to file a 1065.  But Mom (age 80 + going on 130) wants to take all the income (none have losses anymore) and just file "like she has always done" for this year.  That is the way she did the books she says.  The LLCs started late August of 2020.  I really don't want to split the info up for the year.  She will never be able to do it.  I will have to look at all the dates on her hand written lists and split it all up.  Do partnerships have to file tax returns like S-corps do?  I don't deal much with partnerships. 

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sjrcpa
Level 15

Partnerships do have to file tax returns - 1065 and state.

Do they perchance have  Operating Agreements that say how income/loss will be allocated?

Did the title to the properties really get transferred to the LLCs?

Partnerships with special allocations are not for the feint of heart/inexperienced.

Many states also have annual fees for LLCs.


ex-AllStar
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SJ...I already told them I won't be doing the partnership returns.  I just don't keep up on those.  Thank you for letting me know the 1065s have to be filed each year. 

jeffmcpa2010
Level 8

Did they set these up themselves or did they have an attorney or some other professional help them?

If they had a professional - I would expect there to be an LLC formation document along with the certificate of organization, and a lot of times an LLC Operating Agreement as well which spells out the answers to some of your questions.

Yes - LLC's with more than one member do have to file either a 1065 or 1120-S depending on which is elected.

Not sure that it is 100% correct but you may be able to convince your self that taking her total #'s for the year and prorating them based on # days before and after funding the LLC does not distort income.

Which brings up another question - Did they in fact ever "fund' the LLC's - IE Legally transfer the properties into the LLC's?

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Oh hell!  I don't know.  I talked to the son I know the best.  I think he had a friend (CPA) I believe help him set them up.  I already told him that I will not do the 1065 partnerships because I don't know enough about them.  I have steered clear of those (unless they were my own) for many years.  Ask me anything about the 1120-H forms...I did about 140 of those this year.  But other than those HOAs I do individual returns.  I can handle rentals and Sch Cs...but I stay clear of S-Corps and C-corps.  I spoke to this mom the other day, she doesn't sound good at all.  I think her days may be numbered and her kids are aware of that.  She also is selling one of the rentals by eminent domain this year along with her personal home next door.  They are widening the road so I am kind of glad I don't have to deal with that either since she has owned these homes for probably 50 or 60 years.  I hate telling people they owe taxes in the 5 or 6 digit amounts.  Ok...going back to work.  Thanks for the break! 

And thank you Jeff!

jeffmcpa2010
Level 8

Wise choice - i never lose sleep turning down a project that is out of my comfort zone.

And losing sleep thinking about a project always tells me to say no.

Have a great rest of your season.