Schedule C versus Schedule E

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keith6014
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Schedule C versus Schedule E

Post by keith6014 » Sun Mar 19, 2017 9:24 am

I started renting out a condo in 2016 used for personal use before . Before renting it out, i started a sole member LLC and then moved my condo under it.

How do i report rental income? is it schedule C or Schedule E. Based on the research, it seems to me that i need to report rental income under schedule E only. Do i need to declare anywhere my sole member LLC / how do i file schedule C?

jebmke
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Re: Schedule C versus Schedule E

Post by jebmke » Sun Mar 19, 2017 9:28 am

Schedule E for rental income and expenses. You will need to complete Form 4562 as well.

Schedule C is for business/self-employment income and expenses. If you don't have any of this, you don't need to file the Schedule.
When you discover that you are riding a dead horse, the best strategy is to dismount.

cherijoh
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Location: Charlotte NC

Re: Schedule C versus Schedule E

Post by cherijoh » Sun Mar 19, 2017 9:33 am

keith6014 wrote:I started renting out a condo in 2016 used for personal use before . Before renting it out, i started a sole member LLC and then moved my condo under it.

How do i report rental income? is it schedule C or Schedule E. Based on the research, it seems to me that i need to report rental income under schedule E only. Do i need to declare anywhere my sole member LLC / how do i file schedule C?


Schedule C involves calculating self-employment tax (the half of SS tax normally paid by your employer). Unless you are acting as a real estate professional and drawing a salary from the rental activity it would definitely be schedule E.

jebmke
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Re: Schedule C versus Schedule E

Post by jebmke » Sun Mar 19, 2017 9:37 am

keith6014 wrote:I started renting out a condo in 2016 used for personal use before .


In order to complete Form 4562 you will need to establish the basis at the time of conversion. Generally this is the FMV of the property (excluding land if you have title to any land) at the time of conversion.
When you discover that you are riding a dead horse, the best strategy is to dismount.

kaneohe
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Re: Schedule C versus Schedule E

Post by kaneohe » Sun Mar 19, 2017 11:08 am

jebmke wrote:
keith6014 wrote:I started renting out a condo in 2016 used for personal use before .


In order to complete Form 4562 you will need to establish the basis at the time of conversion. Generally this is the FMV of the property (excluding land if you have title to any land) at the time of conversion.


jebmke............is F4562 filed only for the first yr or is it required every yr?

jebmke
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Re: Schedule C versus Schedule E

Post by jebmke » Sun Mar 19, 2017 12:26 pm

kaneohe wrote:jebmke............is F4562 filed only for the first yr or is it required every yr?

Every year. This tracks the depreciation year by year and carries it to the Schedule E. If you use the same software every year it will normally handle everything as a carryover. The only tweaks would be if there are improvements or other assets added.
When you discover that you are riding a dead horse, the best strategy is to dismount.

kaneohe
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Re: Schedule C versus Schedule E

Post by kaneohe » Sun Mar 19, 2017 1:32 pm

jebmke wrote:
kaneohe wrote:jebmke............is F4562 filed only for the first yr or is it required every yr?

Every year. This tracks the depreciation year by year and carries it to the Schedule E. If you use the same software every year it will normally handle everything as a carryover. The only tweaks would be if there are improvements or other assets added.


Thanks, I had the wrong impression. We started a rental property in 2015 and filled out F4562 line 19 where the depreciation schedule described.
That Sec. B is is labeled "Assets Placed in Service During This Tax Yr" so I thought the form was only filled out the first yr. Just noticed line 17
labeled "assets placed in service in previous years". I assume that's where the depreciation goes in future years? Seems a shame to have to fill out
a form for 1 or 2 lines (same number) when it's going to end up on Sch E anyway.

jebmke
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Re: Schedule C versus Schedule E

Post by jebmke » Sun Mar 19, 2017 2:26 pm

Just guessing but I wouldn't be surprised if the IRS system ignored the absence of From 4562. It comes out automatically in HR Block ever since I set up the asset. For a single property it probably is redundant. If you have more than one, the 4562 is needed to keep track of each slab of depreciation (I think each property would have a separate form for this).
When you discover that you are riding a dead horse, the best strategy is to dismount.

Lucky Lemon
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Re: Schedule C versus Schedule E

Post by Lucky Lemon » Sun Mar 19, 2017 2:35 pm

jebmke wrote:
keith6014 wrote:I started renting out a condo in 2016 used for personal use before .


In order to complete Form 4562 you will need to establish the basis at the time of conversion. Generally this is the FMV of the property (excluding land if you have title to any land) at the time of conversion.



Basis is the LOWER of FMV or original purchase price (plus improvements).

LL

jebmke
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Re: Schedule C versus Schedule E

Post by jebmke » Sun Mar 19, 2017 2:37 pm

Lucky Lemon wrote:Basis is the LOWER of FMV or original purchase price (plus improvements).

Correct. I am so used to conversion being done by people who are down from original purchase.
When you discover that you are riding a dead horse, the best strategy is to dismount.

keith6014
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Re: Schedule C versus Schedule E

Post by keith6014 » Sun Mar 19, 2017 5:34 pm

Thanks for the responses.
if i understand correctly, do i ignore the existence of the llc for tax filing purposes? or just add it in the Schedule C.
I have the EIN number for my llc.

kaneohe
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Re: Schedule C versus Schedule E

Post by kaneohe » Sun Mar 19, 2017 6:28 pm

https://www.irs.gov/publications/p527/ch03.html

You may have seen that already.

https://www.irs.gov/instructions/i1040se/ch01.html

"Single-member limited liability company (LLC). In most cases, a single-member domestic LLC is not treated as a separate entity for federal income tax purposes. If you are the sole member of a domestic LLC, file Schedule E (or Schedule C, C-EZ, or F, if applicable). However, you can elect to treat a domestic LLC as a corporation. See Form 8832 for details on the election and the tax treatment of a foreign LLC."

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