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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
Satisfied Customers: 586
Experience:  10 years experience
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I have an LLC with my wife and I as general

Customer Question

I have an LLC with my wife and I as general partners/managing member and our two adult children as limited pattners. The LLC owns and rents 5 properties, mostly small homes and a condo. Is it OK to list $4800 (2400 each to my wife and me) as guaranteed payments to partners even though there is only rental income so the payment will all go into an ordinary business loss?
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: Just that the rental income shows a modest real estate income of something over $10,000 so overall the entity is not losing. About 72% is owned between my wife and me, the rest by the limited partner adult children.
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.

Hi. My name is ***** ***** I will be happy to help you.

A partnership (without C or Scorp election) is a flow through entity which means the profit/loss from the partnership will be reported on your individual returns. The guaranteed payments you make will be reported on your K1s as ordinary income subject to 15.3% self-employment tax in addition to income tax as oppose to rental income that is only subject to income tax. Your partnership loss may not be deductible because of passive activity loss limitations.