Level 3

Question

Form 1065 Filing Requirements for LLC

Forum|Forum|1 year ago
December 7, 2024
2 replies
56 views

My sister and I set up a two Member NJ LLC for estate planning reasons. The only asset is a small vacation home that was owned by our now deceased parents. It is not a business and the house is only used about 30 days a year by immediate family members (our siblings, our kids and grand kids). The LLC does not (and never will) have any income or deductible expenses. My sister and I did open a checking account for the house expenses and periodically make joint deposits to cover the annual expenses for real estate taxes, utilities, insurance, repairs, etc. IT IS NOT AND NEVER WILL BE A BUSINESS.

Because we are a partnership (and NOT a domestic partnership), the IRS told me that we must file an annual Form 1065 and two Form 1065 Schedule K-1s even though everything will be $0. Is that correct?

----------------------------------------------------------------------------------------------

Here are two cut and pastes from my Google searches...

1. "Filing requirements for an LLC partnership... An LLC partnership is considered a pass-through entity and must file an informational partnership tax return on Form 1065 unless it did not receive any income during the year AND did not have any expenses that it will claim as deductions or credits".

2. Do I have to file an LLC partnership return if there is no activity?
"If an LLC elects to be treated as a partnership for tax purposes, and the business did not generate any income during the taxable year, it is generally not necessary to file a tax return, unless there are business expenses to be treated as credits or deductions".

ProSeries Professional

This topic has been closed for replies.

Jim-from-Ohio

Intuit Community Champion

sounds like you did some good research. I concur, no 1065 required.. some preparers would still file to stay off non -filing letters but if you do that may get substantial late filing penalties.

M

msmith7305

Level 6

Are you planning to deduct the real estate taxes? How does that fit into your analysis?

George4Tacks

Level 15

I think you got it right. Key phrase

1. "Filing requirements for an LLC partnership... An LLC partnership is considered a pass-through entity and must file an informational partnership tax return on Form 1065 unless it did not receive any income during the year AND did not have any expenses that it will claim as deductions or credits".

I would also ask, how is the ownership recorded with the county? Will each member/partner contribute money to pay utilities, insurance, taxes, etc? Will it ever be occasionally loaned out to friends?

Answers are easy. Questions are hard!

BobKamman

Level 15

I was confused by the assertion that this is not a domestic partnership, because last I heard New Jersey is still part of the US, even though its inhabitants are not allowed to pump their own gas. But I think the helpful IRS taxpayer service representative (who would call them to ask, anyway?) was thinking of two people who are not married but living together in an arrangement close to it. Not, a domestic partnership as distinguished from a foreign partnership.

You seem certain that this property will never be sold, but families have a way of going in different directions when the first (or in this case, second) generation dies. And how does placing it in an LLC affect stepped-up basis? Also, is the insurance policy issued to the LLC, and so it doesn't cover the individual owners who would certainly also be sued? Does your umbrella policy cover that situation?

Apparently NJ requires you to get an EIN before filing for an LLC. I'm sure IRS appreciates that extra work. Maybe it would be required anyway. Speaking of extra work, have you filed the BOI report yet? And NJ has a $75 annual fee for an LLC? That's not as bad as California, where this would not be the solution to estate planning for co-owned property.

F

fredcampo1Author

Level 3

Bob, thanks for replying.

1. Yes, the IRS taxpayer service rep was referring to two people who are not married but living together when talking about a domestic partnership. Don't want to make any Jerry Lee Lewis jokes here, but my sister and I don't qualify for the "domestic partnership" exclusion.

So yes... we do need to file a Form 1065????

2. Insurance will be in the name of the LLC.

3. Already filed a BOIR with finCEN.

4. Yes, NJ has some type filing so they can gouge us $75. Not due until September.

5. Yes... my wife will get stepped up basis for my 50% ownership.

-------------------------------------------------------------------------------

Question... would you file Form 1065 if you were me? If yes, would you prepare a Balance Sheet or leave everything $0?

BobKamman

Level 15

How does your wife get stepped-up basis? Partnerships are awful ways to do business and LLC's aren't much better, so I avoid clients who want them and I usually only deal with dying partners when there are PTP's. Something about the partnership having to elect stepped-up basis before the partner can claim it. Maybe someone here has some insight. But how do you know your wife is going to outlive you, anyway? Or your sister? But then, what do you care? You'll be dead anyway.

Sign up

Login with SSO

Let's get you signed in

Login with SSO