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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4020
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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Four members of an LLC(company) formed in NJ decide to go in

Resolved Question:

Four members of an LLC(company) formed in NJ decide to go in to the rental business.
They apply for a mortgage from local bank for $120,000. Being in NJ I assume to loan is a recourse loan. They are now ready to file a partnership tax return with all four members each being a LLC member for partnership reporting. My question is regarding the K-1 since I do not have to complete other portions of the partnership return since it meets all the qualifications not to have to complete sch L M-1, and M-2 and thus I can put the proper amounts on each partners K-1. So each partner shares 25% of the profit,loss and capital. Being a rental business (1 residential house). The mortgage is made in the names of all four partners; not to the LLC or partnership.

I gave the previous background information to make sure I present this properly in order to get the answer I am looking for which is this: I am not sure on the K-1 where to place the value (dollar amounts) for each partner. Here is my dilemma. First I would have thought that under item K I would place an amount of $30000 on the line for Recourse loan. But then I have seen other k-1s with similar scenario and the amounts are entered under item L, "Capital contributed during the year". which is correct Item J or item L for the entry.
Submitted: 1 year ago.
Category: Tax
Expert:  Stephen G. replied 1 year ago.

Stephen G :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything that is not clear.

Stephen G :

Where is the title of the property, in the LLC's name or in the name of the 4 partners?

Stephen G :

Did the partners put any of their own money in the partnership or is it 100% financed with the $120,000. If so, where did the working capital come from?

Customer:

In the name of each one of the partners not the LLC. They are actually two married couples. And no, they did not put in any money;; all they did was the mortgage for $120000.

Stephen G :

Are you there?

Customer:

yes

Customer:

are you there?

Stephen G :

Did you receive my question?

Customer:

yes, I can see you on the screen along with my answer to your questions

Stephen G :

ok

Stephen G :

I see it now, sorry

Customer:

no problem.

Stephen G :

How much did the property cost?

Customer:

the total cost was the $120000.00 for the mortgage which included the house and property of course

Stephen G :

Well it sounds like they don't have any equity in the project so you would enter the $30,000. in the recourse loan category.

Customer:

Stephen how come on my screen it is showing the name "fordlover 1988" don't think that is me?

Stephen G :

Of course they would have the income for the year as addition to the capital accounts.

Customer:

Right I knew that part of it. As you can probably tell I am trying to do this for the first time and the problem was where to put that $30k. When you mentions equity that would be if they had contributed monies?

Stephen G :

I don't know, it doesn't show that when you log in & out.

Stephen G :

Right, you put the 30K in the recourse loan section.

Customer:

Okay, and yes the partners each will show a $700 gain which I already put on line L current year increase.

Customer:

And, I thank you very much for a very concise answer.

Stephen G :

By the way, we always complete all those schedules even if they aren't required; otherwise, there's no record going forward & it can get complicate; you have to work out the numbers anyway, so you might as well complete the schedules.

Customer:

I was afraid you would say that; but I agree and will do it; I did think about that and had started doing the schedules; and it dawned on me about not have a record.

Customer:

I will take your advise and do the schedules. Thanks

Stephen G :

ok, I'll leave my contact information in case you want to reach me again.

Customer:

thanks so much, you were great.

Customer:

Okay I am going to finish and give my rating

Stephen G :
If you need to contact me again with any tax or financial questions, you can just ask for "Steve G" at the beginning of your question. Again, please remember to rate my response. Bonuses, where you think they are warranted, and excellent ratings, are always most appreciated. Thanks again for using JustAnswer.com.

You may get a short survey from the site; if it isn't too much trouble I would appreciate it if you would answer it; the survey results are used to rate our performance;

Thanks very much, Steve G.

Customer:

I already have checked excellent service. If I have questions in future can I request you if your available?

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4020
Experience: Extensive Experience with Tax, Financial & Estate Issues
Stephen G. and 4 other Tax Specialists are ready to help you

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