All business income and expenses are reported on the partnership tax return form 1065 - http://www.irs.gov/pub/irs-pdf/f1065.pdf
Net income - after deducting all qualified business expenses will be reported to partners.
Partnership should issue schedules K-1 to each partner reporting pro-rata share of net taxable income - http://www.irs.gov/pub/irs-pdf/f1065sk1.pdf
If the income is distributed only to one partner - the schedule K-1 is issued only to that partner.Partners may agree that only one member will receive the whole income and will be liable for taxes.
Members in turn will report income/losses on individual tax returns - in your situation - on schedule E part II - http://www.irs.gov/pub/irs-pdf/f1040se.pdf .
I suggest you to provide the information above to your tax preparer for consideration.
Let me know if you need any clarification.
Please see additional information in IRS publication 541 - http://www.irs.gov/pub/irs-pdf/p541.pdf
Let me know if you need any help.
Is this choice our option reporting it on a 8825 form rental income for the partnership, or
does it have to go on her 1040 return.
The partnership should use the form 8825 for rental real estate activities - that is not a choice - the partnership must use this form.
The purposes of the form - to determine net rental real estate income (loss) which is reported on the form 1065 and on the schedule K-1 for each partner. The income from the schedule K-1 would be reported on a partner's individual tax return - form 1040.
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