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Let me help you by breaking this part out and restating it in perspective:
"So if a LLC pays 3 1099s to contractors"
When you Hire to do something for your business and this someone is not working for their business entity as a Corporate structure (in most cases)...
"(legal, bathroom fixture, and electrical work),"
and they are providing a service or other cost to you that falls under 1099-Misc reporting, but the Fixtures would not be reported unless they are included in the charges as part of the service provided, even though all of this is your Expense or your Improvement expenditure...
"the business can't take a deduction?"
You can deduct reasonable and ordinary expenses, such as legal fees. You can track basis for improvements.
You are subject to Fines if you didn't comply with the requirement, if your activity falls under the Informational reporting requirements, meant to give clarity to the IRS that you paid people that should themselves be filing income tax returns, and the copy you send to the providers warns them they have also been reported to the IRS.
When I teach, I use the word "discoverable." As in, do Not try to deduct something that doesn't meet the requirements for being deductible, and then expect to include it where it can be found. Or, follow the regulations.
In this topic, you stated this: "Where do I include 1099s that partner gave to contractors"
Gave To Them, and also Filed with the IRS using 1096 cover sheet = of course you can include it in the financials.
"If a business can take a deduction, where on the 1065 would you report that?"
No differently than any other payment for that same type of cost.
Example:
You paid a plumber to repair something and it involved a new faucet. The payment to an Incorporated Plumber or an independent Plumber are tracked the exact same = for what they did and what you benefited.
The Informational reporting requirement means you would not send a 1099-Misc to a Corporation for that plumbing service. You would send it to the independent Plumber. The informational requirement doesn't change Financial tracking of it.
You paid for plumbing, and you got plumbing.
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