Partnership farming venture

Forum|Forum|2 years ago
September 6, 2023
2 replies
29 views

Hi,

Two individuals formed an LLC and created a partnership last year. The LLC purchased a 2.2M dollar home/land to eventually farm on. The home and the land sat vacant all year. The partnership incurred 22K in mortgage interest and 12K in insurance. My concern is the deductiblity of these expenses due to the fact the farm, if you want to call it that, was not operational in 2022.

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Terry53029

Intuit Community Champion

They did nothing to get the farm ready to run as a business, or do you mean they just didn't have income the first year

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Avs19Author

Level 6

They did nothing to get the farm ready to run as a business nor did they have income. To this day, nothing has happened with the property.

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Terry53029

Intuit Community Champion

I believe you can add property taxes, and mortgage interests to cost basis, but not expense them. If your clients itemize their taxes they could take property taxes (I believe not subject to $10,000.00 limit) and mortgage interest as an investment expense. As far as insurance cost, maybe add to startup cost?? You will have to do further research, or maybe someone will jump in with more experience on the subject

rbynaker

Level 13

I'm not seeing where a business has started or a property is available for rental. My inclination aligns with SJR - startup expenses (if we're convinced there is a trade or business coming).

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Avs19Author

Level 6

According to them, they started to get the land ready in 2022. Not sure if that would constitute whether or not the business has actually started. I don't plan on deducting anything regarding the house/property until it's available to be rented out, which should be later this year once the roof is fixed.

Just-Lisa-Now-

Intuit Community Champion

what are they going to farm? are they going to grow something or raise an animal or some kind? Is the house going to be rented out?

Doesn't really sound like its in service or the business has started at all yet..... you probably need to elect to capitalize the carrying costs until its actually a business. IRC266 (I havent had to use this much, you'll want to read up on how this works)

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

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