So my friend and I plan on embarking into the world of rental properties and signing a general partnership agreement. My question is if one of us purchases the property and the partnership agreement splits all income and expenses 50/50, at the end of the year can we split the depreciation and mortgage interest 50/50 for our personal taxes? Thanks for all your help.
I have invested in "real estate" with others, in in some cases, had partnership agreements made, say 50/50.
On tax time, when my CPA did my taxes, unless stated otherwise, everything is split along the same line, mortgage interest, depreciation, operating expenses etc. There was no need to have another agreement listing how all other expenses are split.
And then you said the partnership agreement splits all income and expenses 50/50, and mortgage interest and depreciation are expenses, so in, it's spelled out.
Thanks for the info Frank. That definitely helps!
You can purchase the real estate as tenants in common. If you do - you would each report 50% of all the items on your respective individual tax return schedule E.
If you purchase the property with the use of a partnership - you would be required to file a partnership return and each partner would get a k-1 and the information on the K-1 would be reported on the tax return.
The issue you have is that it seems like you would be on the title of the property and the other person or the partnership is not on the title or mortgage.
You run the risk of potentially getting audited since the mortgage interest/ RE taxes is tagged to your SSN and not the partnerships.
You might want to think twice before setting up an LLC where the property is held in a partner's personal name. This can become a big mess very quickly. Highly recommended to seek out a competent CPA to guide you through it.
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