Where does this go to on the federal tax return?

Question

Where does this income go to on the federal tax return?

My husband and I invest small amounts of money in many Trust Deeds. (These are loans to buyers to acquire Real Estate). We are thinking of creating an LLC for this income to protect us from any crazy litigation or anything else.

We have a revocable family trust and this family trust will be the sole member of the LLC
To open a bank account we will need to get a EIN from the IRS etc.

4. All income will go the LLC bank account.

My question is where does the income from the LLC get recorded in the federal tax returns? In Sch E as rental income or as business income or ???.? Passive income?

Stuart O. Bronstein · Accepted Answer

First you have to understand that the IRS does not recognize LLCs for tax purposes. As a result you have to elect that your LLC be taxed as a business entity that the IRS does recognize - S-corporation, C- corporation or proprietorship/partnership. If you have done nothing along these lines, the default would be proprietorship (with one member) or partnership (with more than one member).

So initially the answer to your question will depend on how you elect the LLC to be taxed. If as a corporation, it goes on Form 1120 or

1120-S. If as a partnership it goes on Form 1065 and its associated K-1's.

If it's a single member LLC that is taxed as a disregarded entity (which is probably shouldn't be because revocable trusts are also disregarded by the IRS), then someone who knows about that particular point better than I do, will come along and tell you where it goes.

ira smilovitz · Answer

It's interest income. One way or another it will end up on Schedule B. Ira Smilovitz, EA

Taxed and Spent · Answer

Are you in a community property state, and is this community property? Does the revocable family trust have its own EIN? You may not need an EIN for the LLC, depending.

Where does this go to on the federal tax return?

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