Post it in the Classified and you'll get all the Cleveland PM's reaching out to you.

You want to properly classify transactions such as Contributions/distributions if they are between the entity and the owner itself.If the entities are not direct owners, you have have a Due to / Due From to properly keep track of money owed between the entities.Best of luck!

However, at the moment, the IRS and the government has classified it as property. 

If your adjusted gross income (AGI) exceeds $150K and you are not classified as a real estate professional, passive losses from rental properties cannot be used to offset your earned income.

Is there any recommendations for how to work around this or structure the agreement to have the seller pay for the sewer without it being classified as a credit?

Its still definitely a grey area and DSCR Lenders are different - but typically anything rented by the room (classified as "SRO" or "Single Room Occupancy") is an ineligible property type. 

Evan, looks like maybe what your referring to is that any personal property is classified as sec 1245 so the recapture on that portion is taxed as ordinary income (and rest of property is taxed differently). 

However, if you materially participate in a business or real estate activity within the LLC, the income may be classified as active, which could allow the losses to offset active income.Ex: Self-Rental: If you rent property to a business you actively run (like a business you own and operate), the rental income can be treated as active under the self-rental rule.Material Participation: Material participation is the key factor here.

I am looking to understand if there is a way to make MTR income/losses classified as active income (rather than passive) when you do not have REPS status?

I mistakenly posted this in the classified section and wanted to repost in the correct location.