Tax Prep Handling on Partnership Properties

[Victor Alfonso]

Hey Y'all - Long time BP lurker, minimal poster. I purchased a couple of SFR properties in Metro Atlanta in 2022 with a partner and had a couple questions regarding the tax preparation for them. In the first scenario, title is in my name personally and I have the debt in my name as well. The outside agreement with my business partner is that we own the property 50/50, including the gain/loss, depreciation etc. In the second scenario, title is in a revocable land trust in which I am the trustee, with the debt in my name, and the same business partner and I are the 50/50 beneficiaries of that land trust. We were hoping to treat the land trust as a disregarded entity and not file a return for it since it only owns that one single family rental.

My CPA firm suggested I reach out to a real estate tax attorney on how to handle the tax preparation of each of these two scenarios. For those that have dealt with these scenarios, do you have any suggestions?  Do you think I need to retain a tax attorney, and if so is there anyone you can recommend?  Neither are high value properties so I'm not looking to pay an arm and a leg here, but I am willing to retain someone if I need to.

Thank you.

[Natalie Kolodij]

Quote from @Basit Siddiqi:

Quote from @Marc Howard:

@Victor Alfonso congrats on those SFR properties in Metro Atlanta! Tax prep for partnership properties can be a bit tricky.

For the first scenario, you could report the income, expenses, and depreciation on your tax return, then issue a Schedule K-1 to your partner for their 50% share. That way, you're both reporting your fair share.

For the second scenario with the revocable land trust, treating it as a disregarded entity seems like a reasonable approach. You can report the property's income and expenses directly on your tax return, then issue a Schedule K-1 to your partner for their 50% share, just like in the first scenario.

Even though I'm offering you some advice here, your CPA's suggestion to consult a real estate tax attorney is a good one. Tax laws can be complicated, and you don't wanna mess around with them. 

I hope this helps, and best of luck with your tax prep!

This is wrong.
An individual does not provide a K-1 to a partner after preparing their individual return.

Also bad advise for a CPA to suggest for the original poster to speak with a tax attorney.
Most tax attorney's deal with big ticket tax items(interpreting new tax laws, requesting private letter rulings, defending clients infront of the IRS tax courts, etc). The CPA should know how to prepare the tax returns / forms based on the information provided.

 Agree 100% 

Find a real estate specialized tax professional- your CPA should know how to handle real etate filings, or they're not the CPA for you. 

And Marc was also incorrect in his guidance- There is no K-1 issued when reporting as a JV, a K-1 is issued by a 1065 partnership. No 1065, no k-1.