As a quick example, how would you know how much money you have available to spend on phones, advertising, marketing, etc. if you do not have a plan in place for the allocation of funds?  

But I'd first check with your accountant to make sure you know how to allocate correctly.

Create a separate entity and is it possible to allocate the guest home value to that entity, then track income/expense?  

It is a subjective number, just make sure to allocate funds or else you may be caught with a major repair and no money.  

The reason for this is that it becomes a hassle to properly allocate the PITI portions that come in every month with a mortgage payments.However, she did mention at the end of the year when I get my mortgage interest statement that I would have to reconcile this.  

I would not be a managing member and would just get a K-1 with Line 2, Rental Real Estate on it, which I understand is not subject to UBTI.And then could we allocate tax deductions, both cash (maintenance, etc.) and non-cash (depreciation), to the taxable guys to sweeten the deal for them in exchange for perhaps a bigger piece of the profits for me so we're all whole in the end (i.e., their additional tax benefits cancel out their surrendering some profits to me so everything ends up having substantial economic effect)?

For example, I have a tenant who is behind on the water portion of her bill due to the sub-meter company billing in error and us not knowing what she owed.Ideally I would like to allocate that back to Dec and be able to keep all charges in a running order like a real ledger.

Check with your attorney (I'm not one so this isn't legal advice) about reducing his ownership percentage to 20% (with mutual agreement of course) with a special allocation getting to 50% of the profits.

Not as great of a story, but I decided earlier this year to allocate one unit (a 350sqft studio - the smallest in our portfolio) as a "hand up" unit.

I research the banks value, try and get a copy of it or find out the comps they used, how much did the agent allocate towards repairs , then find out if that is in line and if repairs are in line with the repair bids for the property that have already been obtained.if you are not Brad Pitt when there is a female BPO agents and Gisele from Victoria Secret for the male BPO agents then you need to be able to poke holes in their values and attempt to get the bank to lower the value.you working on anything now where you are going through this, if so who is the mortgage servicer?