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My Brother and I have two rental property each property is…

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My Brother and I have...
My Brother and I have two rental property each property is under and LLC, we took a loan to do a major renovation to one of the property, but the bank took both LLC as collateral. the interest payment can I deduct in both LLC or only the property that use the money can deduct it. even those the payment is going to made with the rental income from both LLC. 2 Can we use 50,000 dollars for personal use, or if we use it we have to report it as guaranteed payments
Submitted: 10 months ago.Category: Tax
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9/27/2017
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 10 months ago
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,756
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Welcome to JustAnswer! My name is ***** ***** I will be able to assist you today.

To deduct mortgage interest as an expense the person or entity must actually make the payments and have ownership in the property.

The distribution of the $50,000 would be addressed in the partnership agreement, flow through to a disregarded (solely owned LLC) or if you you have a corporation the distribution may be different.

If the partnership agreement (assuming you have a partnership) states that the payments are guaranteed payments then you are able to make the distribution as guaranteed payments.

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 10 months ago

Please let me know if you have any follow up questions or if you would like for me to expand on the information above.

Thank you!

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Customer reply replied 10 months ago
both LLC is a Partnership between my brother and I, the repair is going to be done only in one property, but the money I collect from that property ( A) is not enough to do the payment I have to use money from the property B to complete the payment
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 10 months ago

I would be happy to answer your question. Please try your payment again, the system can be tricky at times

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Customer reply replied 10 months ago
both LLC is a Partnership between my brother and I, the repair is going to be done only in one property, but the money I collect from that property ( A) is not enough to do the payment I have to use money from the property B to complete the payment
Customer reply replied 10 months ago
did you get my question, and thanks for your help
Customer reply replied 10 months ago
Hi Chad I am trying to get an answer from you
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 10 months ago

You have to complete the payment . If you do not complete the payment, I am not compensated for my time. Thank you.

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Customer reply replied 10 months ago
paid this morning, or I have to pay to clarify your answers.To deduct mortgage interest as an expense the person or entity must actually make the payments and have ownership in the property.The distribution of the $50,000 would be addressed in the partnership agreement, flow through to a disregarded (solely owned LLC) or if you you have a corporation the distribution may be different.
If the partnership agreement (assuming you have a partnership) states that the payments are guaranteed payments then you are able to make the distribution as guaranteed payments.
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 10 months ago

I will reach out to customer service because your payment isn't being reflected on my end.

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 10 months ago

both LLC is a Partnership between my brother and I, the repair is going to be done only in one property, but the money I collect from that property ( A) is not enough to do the payment I have to use money from the property B to complete the payment

Even though you have separate properties, if you are acting as one business unit you may use funds from property B to cover costs from property A.

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 10 months ago

Please let me know your follow up questions. I will continue to answer your questions and wait for a response from our customer service.

Thank you!

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Customer reply replied 10 months ago
no each business is a separate entity with their own EIN
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 10 months ago

In that case, if the revenue from A can't pay for the repair cost, then entity B would have to loan the money or you could make personal loans.

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 10 months ago

If you don't keep the entities separate by not commingling funds, the IRS could consider the entities one entity.

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Customer reply replied 10 months ago
the property that I transfer will be our beginning capital
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 10 months ago

Ok. To clarify, you will be using revenue from property B and funding property A after you have distributed profits to the partnership from Property B. If this is the case, then this transaction is allowable.

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Customer reply replied 10 months ago
thanks
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 10 months ago

I reviewed the question to ensure we are on the same page and correct me if we are not.

You are able to use the proceeds from property B to fund the repairs of property A. Since the properties are two different entities you will need to claim the profit from company B before you spend the funds on property A.

You are also able to change the partnership agreement to reflect payments to each partner in any manner you would like and you can make those changes up until your taxes are due.

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 10 months ago

If you have any further questions please let me know.

If you are satisfied with this answer, a positive rating by clicking on three stars or more would be appreciated.

Thank you!

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