Joint Ownership - One Owner Due More Income Than Other

[Bryan Scott]

Hi All,

My brother and I recently inherited a 4-family rental unit, 50/50. He lives closer and will be more hands on with the property, so a 50/50 split of profit isn't equitable. I would like to arrange for a fixed management fee payable to him, that would be extra income for him and an expense for me. Is this possible with the property not held in an LLC or S-Corp? If not, any other clever ways to split the expenses evenly but provide one owner with a bit more of the profit? Thanks!

[Linda Weygant]

Yes, what you want to do is possible without the property being held in an LLC. (Please do not hold rental properties in an S-Corp - the tax issues around that can be a nightmare).

Your brother can receive a fixed amount (or a percentage) each month and that gets allocated to him in the JV (Joint Venture) records. You then split the balance of the distributions in a 50/50 manner.

On his tax return, he will need to declare that property management income separately and he should consult with a tax advisor on the correct/best way to do that if he doesn't know.