Posted by JHyre in Ohio on March 18, 1999 at 06:12:59:
Real estate expenses/income incurred in 98 should go on your 98 return. The reimbursement scheme detailed above works with respect to expenses, but why defer deductions? Time value of money says- take 'em now, CPA’s convenience says “Let’s wait till next year!”.
LLC formation expenses are added to basis in LLC units/shares. Some of those formation expenses are amortizable (depreciable)- your CPA should know which ones- See Code Section 195.
Posted by Jim Beavens on March 17, 1999 at 16:24:21:
In February of 1999, I closed on my first rental properties. In January of 1999, I formed an LLC to take title to these properties prior to closing (with my wife and me members). Most of the expenses leading up to these two events took place in late 1998 (the property inspection and initial deposit to the attorney to set up the LLC were paid in December 1998).
Since the LLC didn’t exist until 1999, then it stands to reason that I wouldn’t file a 1998 tax return for this LLC. But should I do anything about these expenses I incurred in 1998?
The most comprehensive answer I have heard so far is that since I incurred some expenses for another tax entity, then I should write up an expense report and submit it to the LLC, with no effect on my 1998 personal tax return. Then next year, the LLC would claim the reimbursement for these expenses in its 1999 tax return, again with no effect on my personal tax return.
This makes sense to me, but I just wanted to query any tax professionals here for a second opinion before I file my personal return with no mention whatsoever of these expenses. I plan to have a CPA do my taxes next year, but thought it unnecessary for this one last year that I’m still just filing for myself. Any help appreciated.