All Forum Posts by: Navid A.

Hey BP,

How do mileage deductions work in a partnership structured as a multi-member LLC? Are the miles I drive only deductible to my share of the rental income or is it deducted from the total income of the LLC first?

My partner in this new LLC is the "money guy" and I'm running the operations for a 50/50 split. I hope I explained my question clearly. For example:

Total Gross Annual Income: $20,000

Partner 1: drove 500 miles (2000 x .575 = $1,150 deduction) and earned $10,000 (50%)

Partner 2: Drove 0 miles and earned $10.000 (50%)

Would Partner 2 be able to deduct the business' miles driven or do those miles only get deducted from Partner 1's income? 

Thanks!

@Claude S.

I already own property under the LLC and prefer not to do another quid claim transfer. A new LLC will also cost an additional $225 vs $50 for the amendment.

Thanks everyone, learned a lot in this thread. Mostly that CPAs can't agree on anything haha. But really, great information all the way around. I will make the amendment immediately and will also file the 8832 with the IRS. Hopefully won't get an IRS letter, but if I do, how should I respond? Just tell them that the Articles of Organization was amended on X date?

@Josh Dixon @Natalie Kolodij, thanks for clearing this up for me! Much appreciated. I reviewed the IRS letter for my EIN number and it does confirm they want a 1065 filing for it. I did some research with my state and found the proper form needed to file an amendment to my Articles of Organization to remove my wife as a member. There's only a $50 filing fee. Would this be sufficient to avoid a separate filing requirement before year end? I'm hoping this will be the solution to all this. Goes to show that not all CPAs are created equal. Had I listened to my CPA's guidance, I would've been in the hole. Needless to say, I will be needing a new CPA!

@Natalie Kolodij, thanks for the reply. I talked to my CPA today and this is what she replied with, "There is a rule that allows married couples who are joint LLC members to report the income on their personal return. A separate return will not be necessary."

Is my CPA misinformed? My LLC is registered in NC, not a community property state.

Are there any advantages of having my wife as a member of the LLC? She's currently working a separate W2 job as well and will be for the next few years. I would appreciate your advice on this, perhaps even schedule a consult since you're also in NC? ...not sure if my CPA specializes much in RE.

I have a LLC with my wife and I listed as members under the Articles of Organization. Does the IRS consider this LLC as a sole Proprietorship? Also, since it's a pass through entity, I don't need to file a separate return for the LLC, correct? Thanks for the help!

I'm currently reading the "Book on Tax Strategies for the Savvy RE Investor" and it led me to an interesting question.

How does a Refi impact what you can depreciate on your rental property? For example, you buy a property cash for $50K, rehab it for $30K, and refi for $85K. Assuming the land value is only $10K, what amount can you depreciate over the course of 27.5 years? Or would you use cost segregation at that point?

Thank you both for the quick reply.

@Ashish Acharya, I wish every tax law could be broken down as easily as you described! Thank you for that. What would be some limitations to have much of a loss I can claim for the year vs carrying it forward?

If you're employed with a W2 Salary and are investing in rental properties under a LLC (disregarded entity), would you even be able to make deductions if they add up to be less than the standard deduction on your personal return, $24k in my case as I file a Married, joint return?

With only a few properties, I doubt I'd come close to breaking the $24k standard deduction threshold. Am I missing something?

Thanks!

I think this is a topic many don't talk about or mention. Unless investors are not pulling permits for their rehab, this increase in property tax assessment could be detrimental to your initial analysis and bottom line. I'm surprised more people haven't replied to this thread, perhaps it's not as big of a deal to consider?