Partnership Tax Implications with Out of State Property

[James Landon]

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?

Thanks very much!

[Linda Weygant]

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.