3

Thank you in advance to whoever decides to read this and offer their insight.

A friend and I own residential rental properties as Tenants in Common, 50/50 split under our TIC agreement. We have a federal tax question that our CPAs disagree on.

His CPA says we need to create a JV entity and get an EIN, create a partnership return for the JV, and issue K1s to ourselves.

My CPA says that's unnecessary and that we can just each report 50% of the income and expenses -- rent, P&I, insurance, etc. -- under our own Schedule E.

From my research, it seems like the difference might lie in the question of whether we are a Qualified Joint Venture. However, everything I can find about QJVs is trying to answer questions for spouses, which we are not.

Which CPA do you agree with and why?

New contributor
ScotchAndSteak is a new contributor to this site. Take care in asking for clarification, commenting, and answering. Check out our Code of Conduct.
2
  • Does your TIC Agreement have anything to say on the matter? Some of them "explicitly provide that the Taxpayer and New Co-Owner would not file a partnership tax return, or otherwise hold themselves out as members of a common business entity" - hansonbridgett.com/Publications/articles/… – Orange Coast- reinstate Monica 2 days ago
  • Yes, it's clear that we are not a partnership or a JV, the agreement has a section that says NO PARTNERSHIP. Another section says no co-owner shall file a partnership return without written consent of the other. It doesn't say we should or can't, just that if we did, it -- along with anything else that gives the appearance of acting as a partnership -- would require consent from the other. CPA says be that as it may, you can't have two people report the same property on individual separate returns, hence why he says you need JV. – ScotchAndSteak yesterday
1

Your friend's CPA must be wrong, but that doesn't mean that your CPA is right: Having signed a TIC agreement, you cannot be compelled to create a JV just to enable you to file taxes. The IRS has a "come as you are" approach. The IRS does not go around forcing people to change their business arrangements. Seriously, they have enough to do without interfering in your business.

A JV may or may not be advisable, but that's another question.

Your Answer

ScotchAndSteak is a new contributor. Be nice, and check out our Code of Conduct.

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.