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Armin Shivazad
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Depreciation from individual to partnership/LLC

Armin Shivazad
Posted

Hi all,

I had purchased a long term rental in 2022 with myself and spouse as the original owners. We took the depreciation on our personal tax return in 2022. We transferred the title of the property to an LLC where both myself and spouse are 50/50 partners. We reside in FL. This year (2023) we are trying to figure out how to do the tax return for our partnership/LLC because the previous year (2022) the depreciation was on our personal return but now the depreciation needs to be on the partnership. How can we move over the prior depreciation from personal return to the partnership?

Thanks for your time in advance. 

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Jason Watson
Tax & Financial Services
  • CPA
  • Colorado Springs, CO
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Jason Watson
Tax & Financial Services
  • CPA
  • Colorado Springs, CO
Replied
Piece of cake. You just relist the asset on your 1065 (Form 8825) tax return with the adjusted cost basis (the original acquisition cost with whatever depreciation you took on your 1040). There might be some differences with your capital account, however depending on some things.

But overall you just plop the asset with its adjusted basis and historical depreciation onto the new fixed asset listing of your partnership tax return. DM me if you want help or need to explore more.
Account Closed
  • Accountant
  • San Diego, CA
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Account Closed
  • Accountant
  • San Diego, CA
Replied
Quote from @Jason Watson:
Piece of cake. You just relist the asset on your 1065 (Form 8825) tax return with the adjusted cost basis (the original acquisition cost with whatever depreciation you took on your 1040). There might be some differences with your capital account, however depending on some things.

But overall you just plop the asset with its adjusted basis and historical depreciation onto the new fixed asset listing of your partnership tax return. DM me if you want help or need to explore more.
Great answer Jason!
Id like to add: 

Depending on how you take deprecation going forward you may need to also take a look at form 3115. Facts and circumstances may vary! 

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81
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Jason Watson
Tax & Financial Services
  • CPA
  • Colorado Springs, CO
81
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98
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Jason Watson
Tax & Financial Services
  • CPA
  • Colorado Springs, CO
Replied
Yes, just like a car... "Your mileage may vary."

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Armin Shivazad
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Armin Shivazad
Replied

Jason, thank you for the reply. I believe I understand your explanation for the 1065 and the adjusted cost basis so thank you for that. 

My other question is can you please explain how to remove the building and depreciation reported under the individual tax return when transferring the property to be recorded under the partnership return? The reason for my question is how to deal with the depreciation that I took already under my individual 1040? Does that have to somehow be removed?


Again, thanks for the explanation and your time.

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Replied
Quote from @Armin Shivazad:

Jason, thank you for the reply. I believe I understand your explanation for the 1065 and the adjusted cost basis so thank you for that. 

My other question is can you please explain how to remove the building and depreciation reported under the individual tax return when transferring the property to be recorded under the partnership return? The reason for my question is how to deal with the depreciation that I took already under my individual 1040? Does that have to somehow be removed?


Again, thanks for the explanation and your time.


You don't have to remove/amend your 2022 return because the property was under your name in 2022. You didn't transfer the property to your LLC until 2023.

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Jason Watson
Tax & Financial Services
  • CPA
  • Colorado Springs, CO
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Jason Watson
Tax & Financial Services
  • CPA
  • Colorado Springs, CO
Replied
Yup, Mary is spot on. 2022 is good to go. For 2023's tax returns, you can simply remove the activity entirely from the tax return including the assets, or you can make them inactive / out of service for legacy purposes.

You might have a passive loss carryover on Form 8582. You would also want to move this to the K-1 activity on your 1040 tax return so future net rental income (profit) can be reduced by prior disallowed losses.

Happy to help.

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Basit Siddiqi
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  • Accountant
  • New York, NY
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Basit Siddiqi
Tax & Financial Services
Pro Member
#3 Tax, SDIRAs & Cost Segregation Contributor
  • Accountant
  • New York, NY
Replied

You would transfer all the depreciable assets from the individual return to the partnership return.
Make sure to property include basis, accumulated depreciation, date placed into service, etc.

Best of luck.