Level 2

Single member LLC rents from another single member LLC, how is this reported on 1040?

Forum|Forum|1 year ago
July 18, 2024
2 replies
17 views

I have a client who owns a business (LLC) that rents a unit from her other LLC that owns the residence. Would I report the rent as an expense under Sch C and then record the rent as income under Sch E? They are both sole proprietorships. Where would I depreciate the building?

Also, to further complicate things, she is renting out the other half of the residence as a residential unit as well. This is recorded as Sch E income but how would I split the depreciation since residence is 27.5 yrs and business is 30 years? Would it be 50/50?

JRC

Level 7

If a Residential property and the Owner also is living in the Property? Looks to be Business use of the home for the Home office Expense.

L

Lolajean123Author

Level 2

So the owner is not living on this property, they are renting half out to their LLC business and the other half out to tenants.

JRC

Level 7

I had the same situation a few years back and did an S-election on the business thus eliminating the Disregarded entity situation of claiming rents to self.

T

TaxMonkey

Level 7

SMLLCs are by default disregarded entities. So keeping that in mind rephrase your question to something like:

I have a client who owns a duplex, she rents half the duplex to tenants and uses the other half as an office for her sole proprietorship.

I think once you rephrase the question like that, the answer becomes pretty clear.

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