Form 1065 Not Necessary?
Is filing a 1065 and K-1 absolutely required when two people own a rental property, have an agreement, but don't officially have a partnership? I thought I read in one of the IRS publications that it wasn't, but I can't find that section anywhere now (Pub. 527 or 541?). An accountant I know said the same thing.
This is not something I'm considering for myself- I'm just trying to learn, and I talk with people who are doing all kinds of things with their businesses.
Thank you,
Tracy
If two individuals are co-owners, then no partnership tax return is required.
If the property is titled in the name of the partnership, then a partnership tax return is required with a Schedule K-1 to each partner.
Hey Dave,
Thanks for clearing this up. I hear so many different things that I don't really know what's true and what's not. It's nice to have this forum to get real answers.
Much appreciated,
Tracy
I believe IRS Publication 541 is what you are looking for. Here is some language from the section on Exclusion From Partnership Rules that addresses when your investing partnership can be excluded from treatment as a partnership for federal income tax purposes.
Investing partnership. An investing partnership can be excluded if the participants in the joint purchase, retention, sale, or exchange of investment property meet all the following requirements. They own the property as co-owners.They reserve the right separately to take or dispose of their shares of any property acquired or retained.They do not actively conduct business or irrevocably authorize some person acting in a representative capacity to purchase, sell, or exchange the investment property. Each separate participant can delegate authority to purchase, sell, or exchange his or her share of the investment property for the time being for his or her account, but not for a period of more than a year. [ Edited by DaveT on Date 02/11/2004 ]
Dave,
That's exactly what I was looking for. How is it that I spent quite a bit of time looking through www.irs.gov and couldn't find it? Am I starting to slip already? Is it all downhill from here?
(just had to try that smilie)
Thanks very much,
Tracy