Three brothers inherited a house. Turned it into a rental. How is the income reported to each for tax purposes?

jmpederson · ‎12-06-2019

Brothers intend to rent property for less than two years total before selling.

George4Tacks · ‎12-06-2019

Does an estate or trust own this, or is it now owned by the individuals?

Answers are easy. Questions are hard!

jmpederson · ‎12-06-2019

It is owned by the individuals. One of the brothers is mentally challenged so his share is owned by his trust.

jmpederson · ‎12-06-2019

Can we just use the P&L for the property and let each take 1/3 of the net profit or do we need to issued K-1's?

George4Tacks · ‎12-06-2019

This sounds like a partnership, which should get an ID number to file for 1065. I believe this is especially true since one partner is a trust.

https://www.irs.gov/businesses/small-businesses-self-employed/partnerships

https://www.calt.iastate.edu/blogpost/when-small-partnerships-dont-file-partnership-return is of interest

Answers are easy. Questions are hard!

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TaxGuyBill · ‎12-06-2019

Joint ownership of rental property does not necessarly need to be on a 1065. They can each report their share on their personal tax returns.

"A joint undertaking merely to share expenses is not a partnership. Mere co-ownership of property that is maintained and leased or rented is not a partnership. However, if the co-owners provide services to the tenants, a partnership exists."
https://www.irs.gov/instructions/i1065#idm140242305001840

abctax55 · ‎12-06-2019

Divide by three?

HumanKind... Be Both

jmpederson · ‎12-06-2019

Do we simply use the P&L statement or should K-1's be issued for each?

CMS_VA_CPA · ‎12-06-2019

Divide by three. No K-1 required as long as no partnership or LLC was established.