I have downloaded the GnuCash accounting software for use with our real-estate rental LLC, in hopes of following more universal accounting practices and determining our individual cash basis, but my accounting experience is rather low (I'm at least familiar with the concept of double entry). We need to be able to calculate our cash basis for use in Form 1065 Schedule K-1 and in determining PAL.
First of all, is there a built-in function or report to calculate each member's cash basis? This is the most important part of my needs. If this is not possible in GnuCash (including building custom logic somehow), what other open-source software packages support this calculation?
Secondly, where can I find some written advice on which accounts (and in which order) to set up the ledger? I have an accounts outline I'm drafting based on GnuCash's "Business Account" template, removing accounts I deem unnecessary and attempting to incorporate the categories from Form 8825 (e.g. "Cleaning and Maintenance").
Based on this article, I am adding special accounts for assets (building, accumulated depreciation on building), liabilities (mortgage payable accounts for each mortgage), and expenses (mortgage interest charges). Once I get the ledger set up comfortably, I plan to transfer the transactions (by hand if necessary) from the spreadsheet into the accounting software.
I'm hoping for something a bit more involved than "hire a professional." :)
A friend of mine and I have been renting out a property for the last several years. We decided last year to form an LLC in hopes of reducing our liability by transferring the ownership of the mortgage and title to the company. Unfortunately, both the property and title are still in our individual names.
We are looking to file our taxes this year by using Form 1065, U.S. Return of Partnership Income. In the past, we have always divided all the numbers in half (50.00% ownership), but since we formed the business last year, we were given some advice that it would be beneficial to start filing as a company moving forward. The rationale was that we formed an informal "partnership" the day we started renting together, and therefore could/should have used Form 1065 starting that year, regardless of the ownership of the property.
I've been doing quite a lot of research on how to fill out these forms, and have completed the 1065, the 8825 (Rental Real Estate Income and Expenses...), and 4562 (Depreciation and Amortization). I am relatively comfortable with the numbers we have in these forms based on all the research I've done on all the tax laws, etc.
However, where I'm having an issue is on the Schedule K-1 (Partner's Share...), Part II (Information About the Partner), Line Item L (Partner's Capital Account Analysis).
We use a spreadsheet to track all of our transactions, and break them down into categories for tax reporting (income, insurance, utilities, cleaning/maintenance, improvement, etc.). Unfortunately, we've never properly tracked our cash basis, which is a requirement for properly figuring out how much of the loss can be deducted from our personal income, and which Line Item L is designed to summarize.