Partnership Income / Deduction Split

5 Replies

Hi BP. I have a feeling this will be a stupid question but here it goes.

I have a partner who only wants the tax benefits of real estate and is not concerned about the property income. Is it possible to purchase real estate as a partnership LLC and have all the deductions be unevenly split between the partners?

For example: I would receive all income from the property (rent) and my partner would receive all of the deductions?

Thanks in advance

@Neddie Smith , I know people who do stuff like this with trusts, but it is complicated and I am wary of it. 

So to answer your question, it is possible because I know people who do it. Trusts are even more location specific than LLCs, though, so you would need to find someone who really knows their stuff. Even then, make sure you are comfortable with it because I feel like a lot of these guys are really pushing the envelop and I don't know how well their stuff would stand up in a court of law or against the IRS.

@Neddie Smith I was in a similar situation with a partner of mine (technically, my partner's pension fund) and we discussed this with a very experienced and competent attorney several times. He basically said "no." Doing so would cause too many complications and, if the IRS wanted to make an issue of it, we'd be in trouble and it wouldn't be worth it. To keep things simple, we stay consistent with our percentage ownership in everything and that is reflected in our K-1s.

For additional work I've done for our LLC, we will pay me "management" or "services income" and I get 1099's at the end of the year. It's a way to adjust to make up for the extra work that I do without changing ownership percentages.

Originally posted by @Neddie Smith :

@Andy Mirza So if I understand correctly, according to our partnership split e.g. 50-50, the deduction allowance would also be 50-50 correct?

 Yes