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Hi Lev, Could I ask you additional questions regarding reporting

Hi Lev, Could I ask you...
Hi Lev,

Could I ask you additional questions regarding reporting of mortgage interest by the owner of the LLC for a mortgage arranged through a promissory note bw him and the LLC?
Thanks and have a great day,

Emil
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Answered in 5 minutes by:
5/1/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,167
Experience: Taxes, Immigration, Labor Relations
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LEV :

Hi and welcome to Just Answer!
Is that a single member LLC?
What is your actual question?

Customer:

Hi Lev,

LEV :

Hi

Customer:

Hi Lev,


I had to step out for a while.


My questions are:


- I am a single member (owner) of a LLC in NC and am from Canada. I am in a promissory note agreement bw the LLC and me for the mortgage/mortgage interest provision when buying the properties for the LLC.


- When reporting my taxes for 2012, I am using form 1040NR Schedule E to report the rental properties income/expenses. My LLC’s accounting is based on the “accrual” principal.


- My question here is: Could I report the mortgage interest expense accrued throughout the year on my tax return? If so, could I also report this same mortgage interest as income and where (which row) of form 1040NR? To clarify further – no mortgage interest was paid to me during the year (it will be paid in 2013), but it was only accrued.


- If I report the mortgage interest as income, are there any Employment taxes to be considered?


Thanks, XXXXX XXXXX a nice day.


 


Emil

LEV :

A single member LLC is disregarded entity - means - all income and expenses are reported on owner's tax return - in your case - on schedule E.
While the LLC is a separate legal entity - and you may provide a mortgage to the LLC - for income tax purposes the LLC is ignored and from income tax prospective - that is a mortgage you provided to yourself. Therefore - neither interest payments are deducted on schedule E nor interest income is reported on 1040NR.

Customer:

Hi Lev,

Customer:

Thanks for the prompt answer. One last clarification - and I will rate and pay your answer. Since the mortgage expense is included in the books of the LLC and is payable to the owner, if it really gets paid in 2013, does it have to be reported in my next year tax return? Will something change if I assign shares of this LLC to the CCorp in 2013 (i.e.5%) - will then I be able to report this mortgage interest in the new forms (then the LLC will have to report as a corporation or partnership, I guess)? Thanks, Emil

LEV :

If that will NOT be a single member LLC - but it will be partly owned by you and partly by C-corporation - the situation would be different.
The LLC with several members is NOT a disregarded entity - it is generally classified as a partnership for income tax purposes.
In this case a mortgage interest is deductible for the partnership - and is taxable for you as a recipient If that is a case - your interest income will be reported on form 1040NR line 9a.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,167
Experience: Taxes, Immigration, Labor Relations
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Customer reply replied 4 years ago

Thanks, Lev


You completely answered my question.


 


Wishh you all the best,


 


Emil

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