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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
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Experience:  10 years experience
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On what form and how do I enter expenses incurred by one member

Customer Question

on what form and how do I enter expenses incurred by one member of an llc that do not apply to the other member (2 members total 50/50 agreement) These expenses would include automobile (standard deduction) business cell phone and home office expense. The LLC is in it's first year of operation and used a cash accounting system. The tax return is being filed on the 1065 form with the supporting schedule K and K-1 forms. One partner contributes services while the other provides money and management expertise.
Submitted: 5 months ago.
Category: Tax
Expert:  Lane replied 5 months ago.
IRS will likely disallow UNLESS there is an operating agreement that allows for (delineates) this. ...In the absence of an operating agreement, all income, expenses, capital gains, and capital losses are allocated in accordance with ownership interest....The Op Agmt. governs LLC members and their operation of the LLC, including voting rights, who has check-signing authority, profit-sharing, rules for ownership transfers, responsibilities of the individual members, and other essentials. ...Has there been an operating agreement that separates out income and expense responsibilities?

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