LLC Partnership Tax Deductions - Where To Deduct Shared Expenses?

[Shad Rich]

I started an LLC partnership two years ago for rental real estate investing. The LLC currently holds two properties, one of which has been put into service. The properties obviously have their specific income and expenses (rent, lawn maintenance, advertising, repairs, etc.). However, there are also shared costs associated with running the LLC (bank interest, email hosting, accounting systems, property management systems, business liability insurance, business licenses, etc.).

I have done forum and internet searches trying to determine the answer but have not come across anything of value. For the Bigger Pockets users who have an LLC Partnership holding more than one property (or tax accountants who are feeling generous), my questions are:

1. Do you deduct the "common/shared" expenses at the LLC level on the Schedule K-1 as "Ordinary business income (loss)"?

2. Do you create a journal entry, dividing the "common/shared" expenses to each in-service property? This results in the expenses being deducted on the property Form 8825, going to "Net rental real estate income (loss)" on the Schedule K-1?

3. Does it matter?

For context, I maintain my own books and file my personal taxes as well as the taxes for two LLC partnerships (one real estate and one service-based). All income and expenses are tracked by location (each rental property or for the LLC office). They are reported on "Profit and Loss by Location" reports.

Thanks in advance for informative responses.

Shad

[Clifford C Toth]

@Shad Rich

Hello Shad, I have multiple LLCs and report their individual expenses on their respective tax forms. For expenses that are shared I have another holding LLC that all my office expenses, car, gas and all other day to day shared expenses are expensed to.

Hope that helps you.

Clifford