I am looking to invest through a partnership in an out of state property. The partners live in 2 different states and the property is in a different state than any of us reside.
Which state(s) do I need to file the state specific 1065 and K-1s?
Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
9y
The Partnership files its 1065 and associated state returns in whichever state the property is located in. If it's a state without personal income taxes such as Texas or Florida, then no state return is required.
The partners each use the K-1 to file their personal tax returns. In most cases, the partners will need to file in the state where the property is and then also report the income in the state where they live, but get a credit on that return for whatever they paid to the other state.
But some states are wonky and have lots of different provisions. Look at the filing requirements for the state where the property is and the state where you live to make sure you are honoring all reporting requirements.
Investor · Allen, TX · Member since 2016 · 104 posts · 37 votes
9y
I'm quite new to REI too and am interested in partnerships and noticed that you have experience with partnering on past projects. I was wondering if you could paint a picture of how your partnership experiences have worked.
Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
9y
The Partnership files its 1065 and associated state returns in whichever state the property is located in. If it's a state without personal income taxes such as Texas or Florida, then no state return is required.
The partners each use the K-1 to file their personal tax returns. In most cases, the partners will need to file in the state where the property is and then also report the income in the state where they live, but get a credit on that return for whatever they paid to the other state.
But some states are wonky and have lots of different provisions. Look at the filing requirements for the state where the property is and the state where you live to make sure you are honoring all reporting requirements.
Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
9y
You will file a state return (assuming it is a state that requires it) in the state where the property is located. Each individual partner will then likely have to file a nonresident state income tax return with they get the state K-1. I say most likely because you should really get with a CPA who can give you an accurate answer based on your specific facts. I don't know what state(s) you are referring to.
Thanks Linda and Lance. The property is in TN, which I think means we will not need to file a state K-1 or nonresident state income tax. I'm sure that will please my home state as they can then tax the full amount. I'll keep digging into this. Thanks again!
Milind, my partnerships have been with close friends and/or family. I know that may be a point of concern for many but we've discussed & documented each persons contributions, strengths, and expectations. I'm only 2 years into my first partnership but so far all 3 have been working out well! We all have a passion to learn more about REI which I think is important.