Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

Reviewing a return. In 2016 a CPA completed a personal

return containing a schedule C...
Reviewing a return. In 2016 a CPA completed a personal return containing a schedule C. There was a statement attached that stated the following:Statement Filed in Accordance with Rev. Proc. 2010-13 and Election to Group Activities Pursuant to Reg. 1.469-4 (e)The following activities have been grouped as a single activity for the first time during the current year.It names both LLC's. Owned by same owner. Owner purchase property it will work out of and pays the one business rent. So one business provides a service and the other business collects rental income. Both are LLC's but not taxes as an S-Corp. She files a sch C.Question, can there be two sch c and separate the activities after this election?
Show More
Show Less
Ask Your Own Tax Question
Answered in 2 hours by:
3/25/2018
Mark Anderson
Mark Anderson, Tax Attorney
Category: Tax
Satisfied Customers: 775
Experience: Tax attorney and accountant
Verified

You may need to file a a statement for regrouping:

https://www.thetaxadviser.com/issues/2013/feb/rowe-feb2013.html

Do you know why they were grouped together?

Ask Your Own Tax Question
Customer reply replied 4 months ago
I do not, and when asked, the taxpayer stated it was the CPA who filed her return. I am assuming it was for the sole purpose of the future losses as nonpassive income. But to my understanding, if this owner decides to close one LLC - service she would have to do the same for the other. If they were separate and never joined, she could still own the real estate and rent it out to someone else. Is this correct?How does one include the rental income and service income on one return if joined on a schedule c? Just as Gross income?

So do they have passive losses that they will be unable to take if you file two schedule Cs?

It looks like you would need to file a statement if you change it:

https://www.irs.gov/pub/irs-drop/rp-10-13.pdf

You would just group the income together and report it on the schedule C. You are just electing to report income and expenses together under federal law. Dissolving the LLC is under state law.

Ask Your Own Tax Question

This says you can't regroup unless the original grouping was in error:

http://wecpas4u.com/~samwheel/images/Activity%20Grouping%20Election%20II.pdf

Ask Your Own Tax Question

It also says:

A rental activity cannot be grouped with a trade or business activity unless either activity is insubstantial when compared to the other activity.

Ask Your Own Tax Question
Customer reply replied 4 months ago
That is what I thought. They are two different business. One is not like the other. One is a Real Estate Holding company to put the Owners property purchased that she will be using as a Place for Personal Services to the public. The Personal Services pays Rent to the Holding Company. These are two different entities. They were joined but they never Dissolved the other LLC with the state.The owner is active on her Holding company. She takes care of the repairs & maintenance and whatever else the property needs. She works out of the structure for her service business. She is not a real estate professional but is active in the holding company. I'm thinking if she separates it, the losses will be passive? Your thoughts.

Are there real estate losses over $25k? The CPA probably grouped it together to allow the losses.

Ask Your Own Tax Question
Customer reply replied 4 months ago
The CPA filed 2016 and it had minimal losses.2017 however, it's a different story.I thought the same, reason it grouped together, for future losses.
Yes, they are over 25K.

Here is some more info:

https://www.taxlawforchb.com/2016/02/1810/

Ask Your Own Tax Question

Maybe another expert can find a better answer. If you just left it, you could say the previous CPA did it. I am not sure what you should do.

Ask Your Own Tax Question
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 5,122
Experience: 35 years tax experience, including four years at a Big 4 firm.
Verified

I'm PDtax. I see the first expert opted out. I can assist.

Ask Your Own Tax Question

It is possible to ungroup, or revoke that election. There is an exception in the Rev Proc 2010-13 that might apply, depending on your facts:

".07 Section 1.469-4(e)(2) provides that if it is determined that a taxpayer’s original grouping was clearly inappropriate or a material change in the facts and circumstances has occurred that makes the original grouping clearly inappropriate, the taxpayer must regroup the activities and must comply with the disclosure requirements that the Commissioner may prescribe."

So, if your grouping was inappropriate, which you may be able to argue given one is a rental entity, and the other is a personal services company that would not be.

I could envision the rental LLC continuing to be passive, likely with the active participation eception, and the operating LLC for personal services be nonpassive.

This might give you the opportunity to revise the reporting entity to support this revision. Leave the rental LLC as a Schedule E reporting entity, and consider converting your services LLC to an S corp (with a wage). That would clarify not only the prior grouping, but set up the operating LLC with a wage and tax savings when it generated profits.

Thanks for asking at Just Answer. I hope my take on your question assists. If so, positive feedback, and a bonus if warranted, are appreciated. I'm PDtax.

Ask Your Own Tax Question
Customer reply replied 4 months ago
attach a statement with the return quoting Section 1.469-4(e)(2)

Cite that section, but additionally explain the reason for the split. I might lean toward the operating entity versus the passive one, which is a natural explanation for not lumping together for passive activity (the active business is clearly not a passive activity).

You might include excerpts from the business return, I like to use a Page 1 only, with 'AS ORIGINALLY FILED" written in black marker on the top of the page. A business return with a wage will support your request for a split.

I don't like to say that your previous tax advisor made an error, or misunderstood, unless they did or you have no other way to make this request. A simple statement of your position, with filed tax return support and statutory law relief, should do it.

Thanks again for using Just Answer. Positive feedback is appreciated. I'm PDtax.

PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 5,122
Experience: 35 years tax experience, including four years at a Big 4 firm.
Verified
PDtax and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 4 months ago
Thank you so much!
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask PDtax Your Own Question
PDtax
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 5,122
5,122 Satisfied Customers
Experience: 35 years tax experience, including four years at a Big 4 firm.

PDtax is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,512 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,569 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
Accountant number one: Had a single member LLC which he
Accountant number one: Had a single member LLC which he determined would be better to elect to file as an S-corp. The accounting was done as such with the single member receiving a W-2. … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Tax Question.... I have a tax client that I generated a
Tax Question.... I have a tax client that I generated a corporation for his business as an LLC. What happen is that he got a letter from the IRS saying that he did not file the appropriate forms in ti… read more
taxmanrog
taxmanrog
Master\u0027s Degree
1,042 satisfied customers
Lev Question on an LLC that hold real estate only, not taxes
Hello LevQuestion on an LLC that hold real estate only, not taxes as an S-Corp or Partnership. Owner of the Real Estate Purchased the property to start a business in it. The property was renovated and… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Question concerning two businesses....Owned by same person.
Question concerning two businesses....Owned by same person. 2016 CPA grouped the two businesses - Statement filed in accordance with Rev Pro 2010-13 & Election to group activities Pursuant to Reg 1.46… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I have a single member LLC and want to make a S-Corp
I have a single member LLC and want to make a S-Corp election. The LLC was formed August 2016 but no return was filed for that year due to no business activity. Business activity started in 2017 and a… read more
Carter McBride
Carter McBride
LLM
1,221 satisfied customers
This is a question re section 469 grouping, what are the
This is a question re section 469 grouping, what are the pros and cons? Also what tax year do you need to make the statement in? I fear I may have losses both in my rental income (which is my only bus… read more
James Daloisio
James Daloisio
Attorney
Doctoral Degree
559 satisfied customers
I have LLC partnership with 3 partners and have been filing
I have LLC partnership with 3 partners and have been filing 1065 for 2015 & 2016 Client intends to convert the LLC in to C Corp with effect from 01 01 2017 Question: Can it be converted from 01 01 201… read more
PDtax
PDtax
Certified Public Accountant (CPA)
Master's Degree
5,122 satisfied customers
Lane, I have a client who formed an LLC in 2013 and was
Hi Lane, I have a client who formed an LLC in 2013 and was planning to do an S corp in 2016. Can he still do a late election and get it approved??? His reasonable cause will be that he did not underst… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I bought an LLC back in May and I would like to elect to
Hi, I bought an LLC back in May and I would like to elect to file as a C Corp. I haven't filed the taxes yet not applied for a EIN account.What would be the best course of action to elect the C Corp? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I have a client that set up a single member LLC but wants to
I have a client that set up a single member LLC but wants to file for treatment as an S-Corp what do I need to do to correct the 1120-S filing? Amend as an LLC or file a form 2553?… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
I am a cpa in florida. I have filed a late s election for
I am a cpa in florida. I have filed a late s election for a single member llc that didn't file any tax returns since 2012. I made the s-election pursuant to rev proc 2013-30. The taxpayer filed the si… read more
PDtax
PDtax
Certified Public Accountant (CPA)
Master's Degree
5,122 satisfied customers
Still reviewing the form 2553 for a current LLC taxed as a
Still reviewing the form 2553 for a current LLC taxed as a Sole (Sch C Filer) and now wanting to be taxed as a S-Corp. If only form 2553 is required, but it is filed late if electing to have an effect… read more
Megan C
Megan C
Certified Public Accountant (CPA)
Master's Degree
8,655 satisfied customers
We are real estate professional and own some rental properties.
We are real estate professional and own some rental properties. We did not made election to group these properties during 2011 tax year for rental lose. Can We file an amendment to IRC 469(c)(7)(A) to… read more
socrateaser
socrateaser
1,031 satisfied customers
Background: My client is being audited for 2010: 1. Simple
Background: My client is being audited for 2010: 1. Simple facts:The auditor is going after section 469. She will win on this point, and I will not pursue this with him because he is correct. However … read more
PDtax
PDtax
Certified Public Accountant (CPA)
Master's Degree
5,122 satisfied customers
I want to file an LLC as a S corp for tax purposes, we did
I want to file an LLC as a S corp for tax purposes, we did not elect within time, so I am assuming out of the 4 Rev Proc's that can be used for late filing, I use Rev Proc 2004-48, which is for entiti… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
After deducting the full amount through section 179, what counts
After deducting the full amount through section 179, what counts as income? Any proceeds earned from the equipment? How about the sale ofmthe equipment? E.g. Buy an equipment for $500,000, deduct the … read more
RD
RD
Self Employed
Master's Degree
1,164 satisfied customers
ON TAX FORM 1120S PAGE 1 LINE G. IS THE CORPORATION ELECTING
ON TAX FORM 1120S PAGE 1 LINE G. IS THE CORPORATION ELECTING TO BE AN S CORPORATION BEGINING WITH THIS TAX YEAR. ANSWER IS YES. CAN I FILE FORM 2553 AT THE END OF THE YEAR PURSUANT TO REV. PROC. 2007 … read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
Hi [I am willing to pay as much as needed to get PRECEDENCE ...
Hi:[I am willing to pay as much as needed to get PRECEDENCE rulings.] I am being audited by IRS for Tax Year 2006 (I have not filed my return for tax year 2007). IRS auditor has accepted my hours for … read more
Anne
Anne
Master Tax Preparer
1,328 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x