Real Estate Partners LLC Tax Return Questions

[David Reardon]

I have a 50/50 partner in an LLC and we are rehabbing a home with an upstairs and downstairs unit. We have been renting the garage to a guy for storage and have $1250 in income for 2019, and have put about $30,000 into materials and labor for improvements.

• Does the $1250 in gross rents go on both line 1a of 1065 (Gross receipts or sales) and on line 2 (Gross Rents) of the 8825 report for our property? Or should they only be reported on 8825?

• Am I correct in my belief that the taxes, insurance, and utilities expenses paid for the rental property go ONLY ON form 8825? They should NOT be included in the expenses section of 1065 (lines 14, and 20)....right? (That would appear to cause a double claim of the expenses)
  
  
• Finally, regarding the $30,000 in improvements. I understand that these can't be added to the basis for depreciation until we rent the portion of the building we are improving. (We're currently renting only the garage.) So, on the balance sheet, Schedule L, I put rehab costs and improvements to the building on line 6, "Other current assets." The attached statement describes this as "Building improvements--not yet added to basis for depreciation."
  
  Is all that okay? I needed to put those expenses in there somewhere to get the balance sheet to stay in balance. "Other current assets" looked like a good spot!
  
  
• Next year, when those improvements can be added into the basis, can I simply add them as a new entity on the depreciation schedule (4562, Part III) with their own 27.5 year schedule? Or is there a more complicated formula that needs to be followed to merge both the original building basis with the value of the improvements?