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

[jmpederson]

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

[George4Tacks]

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

[jmpederson]

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

[jmpederson]

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 · Accepted solution]

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

[TaxGuyBill]

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]

Divide by three?

[jmpederson]

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

[CMS_VA_CPA]

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