Filing a 1065 Partnership return Husband/Wife vs Schedule E

[Tony C.]

We (husband and wife filing jointly) are looking for a CPA. While interviewing CPAs to file our 2012 taxes we are trying to determine if we should file a partnership return or listed all of our properties on our schedule E.

Currently we have titled our 16 properties in 4 LLCs and we have a 5th LLC where we manage our properties. One CPA is telling us that we need to file a partnership return for all LLCs and the other CPA is telling us that we can place all properties on our Schedule E and use Schedule C for our property management activities

We like the Schedule E and C approach because it's cheaper.

What approach is correct? Or is both approaches okay?

[Steven Hamilton II]

Originally posted by Tony Bc:

We (husband and wife filing jointly) are looking for a CPA. While interviewing CPAs to file our 2012 taxes we are trying to determine if we should file a partnership return or listed all of our properties on our schedule E.
Currently we have titled our 16 properties in 4 LLCs and we have a 5th LLC where we manage our properties. One CPA is telling us that we need to file a partnership return for all LLCs and the other CPA is telling us that we can place all properties on our Schedule E and use Schedule C for our property management activities

We like the Schedule E and C approach because it's cheaper.

What approach is correct? Or is both approaches okay?

@Tony C. ,

Since you live in Missouri and both you and your wife are members of the LLC, YOU MUST file a partnership return. If it was a community property state you could file them on Schedule E as a Qualified Joint Venture. Being that the LLC is two member it defaults to a partnership. Here is what the IRS says on the subject: Election for Husband and Wife Unincorporated Businesses

Only businesses that are owned and operated by spouses as co-owners (and not in the name of a state law entity) qualify for the election. See Rev. Proc. 2002-69, 2002-2 C.B. 831, for special rules applicable to husband and wife state law entities in community property states.

I'm happy to answer or confirm any tax/accounting questions if you'd like