Looking for some Clarification.

[Chris Logan]

My wife & I own an Air B&B, and run it as an LLC in a non-communal property state. I just want to make sure we are doing this right. My understanding is we need to file a 1065 to generate K-1s. If we plan on filing a joint return, do we then take the info from the K-1s and each do a Schedule C for the 1040, or does it all go on one Schedule C? This is a new rental and this is our first year filing. Thanks!

[Michael Plaks]

Quote from @Chris Logan:

My wife & I own an Air B&B, and run it as an LLC in a non-communal property state. I just want to make sure we are doing this right. My understanding is we need to file a 1065 to generate K-1s. If we plan on filing a joint return, do we then take the info from the K-1s and each do a Schedule C for the 1040, or does it all go on one Schedule C? This is a new rental and this is our first year filing. Thanks!

If you want to be compliant with the IRS position - then yes, a partnership tax return on 1065, forms K1, and their result flowing to your personal tax return.

Keep in mind that the complexity of partnership tax return preparation is far greater than that of a personal tax return. And if you hire professional help, then the cost is much higher, too.

There is some room for interpretation on whether you must indeed take this route or can get away with simpler filing. This can only be discussed one-on-one, and there's no consensus among tax professionals on this controversial issue.

If you do end up with a partnership, all the details will be on your partnership tax return. K1s essentially transfer a single number to your personal tax return, without any details. This number will not go on Schedule C but on the 2nd page of Schedule E.

Preparing a personal tax return with K1s is easy. Preparing the partnership return is not.