Non-residents with rental properties

Forum|Forum|4 years ago
April 10, 2022
1 reply
5 views

For 1040-NR returns for husband and wife who jointly own investment property, do I need to always do 50% split for net income from SCH E? Can I use different allocation?

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itonewbie

Level 15

Yes, in short. But there's more to this. NRA's are by default taxed on a gross basis. Election will need to be made for US-source rental income to be taxed on a net basis.

---------------------------------------------------------------------------------Still an AllStar

K

khunsandyAuthor

Level 3

Hi, I will do the net election for income to be tax at the net basis. The issue is that all 1098, 1099 forms are under one name, but the properties are jointly owned. I believe I need to split 505 for each TP. However, I wonder if I can do different allocation such as 1005 vs 0% since husband is the only one on all forms. Just make it easier.

itonewbie

Level 15

There's more to this.

You shouldn't arbitrarily allocate the income. First, it depends on the type of tenancy they have. Second, joint tenancy does not necessarily establish the right to income or how the income is shared. These are determined by local law.

There may also be gift tax implications. Although NRA's are not normally subject to gift tax, gift of US real property is one exception. Things to consider are how the acquisition and other expenses such as subsequent improvements and pay down of debts are funded. If the acquisition happened in the recent past, this may only be recognized down the line when the tenancy is terminated (e.g. by the sale of the property, which, of course, is then subject to FIRPTA).

---------------------------------------------------------------------------------Still an AllStar

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