Originally Posted by Shaun22acct
An owner in an LLC partnership acquired a condo in their name, not the companies. The LLC is making payments on it each month. The condo is used as a place to stay for both personal and business trips.
Are the payments deductible in the LLC or are they distributions to the members K-1? Would the # of days used for business be used to prorate the expenses?
If the condo was transferred into the business would they be able to treat it as an investment property and deduct the expenses?
Are the payments deductible in the LLC or are they distributions to the members K-1? =======>>I do not think they are d/b reported on your SCh K1 of 1065. IF the LLC owns the condo in the LLC?s name, then the LLC can write off business location expenses. If theLLC MEMBER operates the business from a home office, expenses such as business phone and supplies qualify for deductions. Personal mortgage payments and utilities usually do not qualify for business write-offs, but an LLC can deduct rent paid for un-owned property as a business expense. If part of a rental home is used as a home office, the company may be able to deduct rent paid for that part of the home. The cost of business property such as furniture, computers and office equipment can be written off over time according to a depreciation schedule. however, in their name, the LLC can not claim the mortgage on its 1065;basically, the LLC can pay whatever it wants to pay, as long as such action is properly authorized by the LLC members. If you are using the LLC to pay your personal expenses, you run the risk of losing the limited liability and protection of the LLC. In other words, if you are paying personal expenses out of the LLC, any creditor or person making a claim against the LLC could say that the LLC is really a sham and is actually an "alter ego" of you. So, normally any claims against the LLC would be limited to the assets of the LLC, but if you are using the LLC to pay personal expenses, the claimants could say that you and the LLC are not distinct legal entities, but are really one in the same, and they could try to get to your personal assets through an "alter ego" theory.
Would the # of days used for business be used to prorate the expenses? ==========>>As mentioned above;as many experts say, larger claims, such as office space, room rentals and other costly expenditures, are looked at more closely by the IRS, and have the highest chance of prompting an audit. You need to be sure to justify these claims by keeping records that include square footage, mortgage and utility bills, and even photographs of the premises.Do keep in mind that it will most likely result in a guaranteed audit. However, if approved, the benefits will be significant for your tax return:
If the condo was transferred into the business would they be able to treat it as an investment property and deduct the expenses?=======>correct as mentioned above; You must put the title, or legal ownership, of any company real estate in the name of the LLC to receive the legal protectionhowever, You could probably ask 10 different people for their position on this issue, and receive 10 different answers. I think that I do not like to transfer title from the individual to the LLC for a couple of reasons. First, transferring the title when the mortgage is still in your name triggers a due on sale clause within the mortgage / note. Second, if you ever go to refinance, you will have to transfer title out of your LLC back to your individual name, creating a strange series of transactions for your lender and/or title company to sort through. Finally, if you ever need to file for bankruptcy, it may prove difficult to discharge a note if the title to the property is not in the filer?s name. so I guess you may need some wise legal advice before you make a decision on the issue.