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Second opinion] i have just started renting out an apartment…

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Second opinion] hi there.....

Second opinion] hi there... i have just started renting out an apartment that I own. And would like to set up guarantee payments for the revenues so that I can contribute to a SEP-IRA. This will make the business a constant operating loss, because I will be drawing the revenue as the GPs, but still have operating costs (mortgage, coop fees, insurance) But I do have other employment income sources against which to post the loss. So I'll have GP income and operating loss from the same standalone llc that I've set up to manage the rental revenue. Am I able to do this?

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I'd then be re-contributing the GPs as capital investment, in order to pay those operating costs, so that there remains no debt on the balance sheet.

Submitted: 11 months ago.Category: Tax
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9/25/2017
Tax Professional: emc011075, Tax adviser replied 11 months ago
emc011075
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Hi. My name is ***** ***** I will be happy to help you.

The answer is no. And here are the reasons. First, rental income is a passive income and does not qualify as earned income for IRA or Sep IRA contribution because it is not subject to self employment tax. And moving the property into a LLC does not change the nature of the income. As single member LLC owner you cannot pay yourself because you do not work for your business, you own it. You cannot deduct guaranteed payments without issuing the individual W2, which again you cannot do it because you cannot pay yourself and issue yourself W2.

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Tax Professional: emc011075, Tax adviser replied 11 months ago

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