Discussion:Where to put mortgage expenses on 1065?
From TaxAlmanac
Discussion Forum Index --> Basic Tax Questions --> Where to put mortgage expenses on 1065?
Discussion Forum Index --> Tax Questions --> Where to put mortgage expenses on 1065?
Tx-learner (talk|edits) said: | 25 March 2008 |
| It way passed midnight... my eyes are so tired, my brain is dry, and I can't find where to put mortgage expenses on a partnership return. Can someone tell me what line# on page 1 of 1065? I know it is not RENT (line 13), because the building is owned by partners.
Thanks so much! | |
TheTinCook (talk|edits) said: | 25 March 2008 |
| It depends on what the mortgaged property was used for. You get to decide between line 15, Form 8825, and line 3c of Sch K. | |
| 25 March 2008 | |
| Since mortgage expenses related to building is owned by one of the partner.Therefore it will be reported on Schedule K as other deduction. | |
RoyDaleOne (talk|edits) said: | 25 March 2008 |
| Well, in my way of thinking most mortgage expenses would be amortized over the term of the loan. | |
| 25 March 2008 | |
| I'm with Roy. Also we don't have enough facts to answer the question. One would have to know what the building is used for , what is the partnerships business, etc. etc. | |
Tx-learner (talk|edits) said: | 25 March 2008 |
| Thank you all so much... but I still don't get it since few different suggestions here.
The building is NOT for rent. It was bought & used for running a restaurant by two partners. Both names are on the property, and they have a mortgage loan that make monthly payments. Total mortgage payment is $40,047. So should the loan amount ($400K) be amortized? or EACH year monthly mortgage payments be amortized? Life of loan 30year in this case. | |
| 25 March 2008 | |
| You need to find a tax professional to help you. It sounds like you may have rental property and/or an operating business, but you still are not providing enough information to answer your questions. Which party operates the restaurant and which party owns the property. You say both names are on the property. Which names? The partnership? The partners? Whose name(s) are on the mortgage? | |
Tx-learner (talk|edits) said: | 25 March 2008 |
| Thanks Brian. I believe that I said it clearly that the whole building is use only for a restaurant (NO rental here). Both names of partners are on the the property and ofcourse are on the mortgage.
I am a tax preparer...and you are telling me to find a professional for help on my client's tax??? I thought I could find some help here, since I am still learning ALOT. | |
| 25 March 2008 | |
| I don't think Bryan's been around much since you joined, so he doesn't know the quality of your posts in general. As one learner to another, and to bump to get other (more qualified) opinions, it's starting to sound like the debt may not be partnership debt - rather it's personal debt of each of the partners? If so, they could then be leasing the restaurant bldg to the partnership, and the partnership would have rental exp...it all kind of depends on the details. | |
| 25 March 2008 | |
| what trillium says is one hundred percent correct in that you have a situation that needs more input above and beyond where to post the mortgage interest expense.
Here are two different ways to look at the scenarion. Partners own building and are leasing building to restaurant <themselves> - in this case you have two diffent returns or schedules to prepare. or Partners own restaurant and building as one entity and therefore the restaurant would recognize mortgage interest expense. Now, if you search - you will find many many discussions on different ways to hold buildings and property when dealing in just this kind of situation. I am bad with search terms so I can't offer any for you to use, but you will find some. Good luck. | |
Tx-learner (talk|edits) said: | 25 March 2008 |
| You are kind & helpful Trillium, thank you. Your post gave me some light, great help!!!
Yes, the loan is on the names of both partners, not the name of the partnership (restaurant's name). So, that means they can lease the property to the restaurant, which can be deducted as RENT expenses. On the other hand, there is rental income is received and need be reported as other income for both partners. I will do some more searching on IRS.gov to see if any pubs with specific instructions. | |
Tx-learner (talk|edits) said: | 25 March 2008 |
| Thanks Fsteincpa! I didn't see your post until I saved mine and it went right after yours. Yes, I understand it now and will take it from here.
All posts are helpful. Thank you!!! | |
| 25 March 2008 | |
| Tx, I didn't know if you were a preparer or not. What I was suggesting is that perhaps this return may be a little outside of your expertise. Since you are a self-professed "learner", one of the most important things to learn is when to pass on a return where you don't have the particular skills to complete the return. That's not meant to be a slight towards you, but you can get into trouble when you venture out and "learn" on a client return. | |
Tx-learner (talk|edits) said: | 25 March 2008 |
| Bj, so what are you saying? I already got help and understood well. I am new & there are still alot to learn as I go, especially on complex returns. Is that a problem?
I might not be as good as you are, but I am willing to find out what I don't know and do the best I could. I don't feel shame to ask questions. If you don't help, others do!!! | |
| 26 March 2008 | |
| I'm sayingg pay your E&O premiums on time and in full. All I'm suggesting is that you are exposing yourself to potential legal problems if you prepare the return incorrectly. If I were on the jury and I heard, "well, I was kinda new at this and I thought I might be able to learn how to do it on the fly", I would side with the plaintiff. I've seen it happen, just be careful. | |
