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I became totally and permanently disabled after a working for 44 years. I returned to college late in life (while working full-time) to fulfill my dream of becoming an RN and at that time found it necessary to secure student loans. Three years after being declared totally and permanently disabled my student loans were discharged. In January 2013 we received a 1099-C form declaring said student loans that were discharged however that amount could be considered as income for 2012. This was a large amount of money and we live on two pensions and social security income.

I started looking on the internet for information regarding 1099-C and felt that this was something that we could not handle alone. I made phone calls locally to a very reputable tax group in a city near us and they said it would cost $500 for an appointment and that they really prefer to do corporate taxes and they referred me to a local person who had worked for them at one time, we called and explained the situation and an appointment was made and then the comment was made that "I will have to do some research on this" and flags immediately went up and we called back and cancelled that appointment. I had been researching the IRSwebsite and every place else I could think of and I was not comfortable doing our own taxes this year. We called another local tax preparer that we had used in the past and made an appointment, however prior to the appointment, while still seeking information regarding our situation,

I came across a website for Gary l. Bode, MSA, CPA, PC in Wilmington, NC. I called Mr. Bodeand explained our situation and asked if he could help. He spoke very knowledgeably regarding the situation and stated that yes; he felt he could help us. As Mr. Bode was in North Carolina and we were in New York I scanned all of our documents including back-up documents for all of our claims and forwarded all to him. Mr. Bode kept in touch with us via email; we have spoken on the telephone several times and have become very comfortable with his knowledge and professionalism. Also, as I am a true "worrier" I have continued looking into information regarding our tax situation and I came upon another web page for Mr. Bode that included testimonials which spoke of his experience with this type of tax situation as it became prevalent during the recession. This reinforced in our minds that we had made the right decision in hiring this person as our tax preparer.

I share all of this as our taxes are now ready to be filed (we do owe tax for 2012 but not the astronomical figure we thought we were facing), and we are confident that they have been prepared with the utmost care by a gentleman who has an excellent working knowledge of the situation we faced and the tax laws that were applicable to said situation.


Bill and Carol

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Even though Gary enjoys helping colleagues, we no longer provide free consults to other tax preparers. He's happy to consult on an hourly billing basis if our schedule allows.

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S Corporation CPA Accountant discusses Schedule K-1 when using Form 8825 to report Rental Property | federal tax form 1120-S | federal tax form 8825| federal tax form Schedule K-1

rental property cpa discusses federal tax form 1120-S, federal tax form 8825 and federal tax form Schedule K-1

If you don’t completely understand your Schedule K-1, ask your S Corporation CPA to explain it. After all the IRS taxes you on the financial information it contains. For a free phone consult call (910) 399-2705.

S Corporation CPAs field calls on Form 8825 logistics. A common topic is the 1120-S Schedule K-1 that reports the rental property activity from Form 8825. So here’s some background and a few tips I’ve learned.

Federal tax Form 1120-S, US Income Tax Return for an S Corporation

Form 1120-S includes Form 8825 and Schedule K-1. So let’s say:

  • You’re a real estate agent operating or electing to be taxed as an S Corporation.
  •  The same S Corporation owns some rental property.
  • All your real estate agent transactions go on federal tax Form 1120-S.
  • Your rental property activity goes on Form 8825 which becomes part of your S Corporation’s federal tax form 1120-S.
  • If you only have rental property  activity in the LLC or S Corporation, most of Form 1120-S is blank except for Form 8825.

Federal tax Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation

Form 8825 attaches to your annual Form 1120-S.

Federal tax Form Schedule K-1Shareholder’s Share of Current Year Income, Deductions, Credits, Other Items

Schedule K-1 reports the tax information in Form 1120-2 to the Shareholders. Lots of little quirks here about what goes where. The reporting of information from Form 8825 is one such quirk.

  • The ordinary income from your real estate agent activity flows into Line 1 of Part III of Schedule K-1, Ordinary Business income (loss).
  • The rental property income from your rental real estate property flows into Line 2 of Part III of Schedule K-1, Net rental real estate income (loss).

It seems that most tax software reports both the ordinary income and the rental property activity, from Form 8825, on a single Schedule K-1. But the IRS doesn’t like that. I think most rental property CPAs take the single Schedule K-1 the software generates and use it to report ordinary income and associated items. So Line 2 of Schedule K-1 is blank. Then we create a second Schedule K-1 within the software to report rental property activity on Line 2.

“You’re personally taxed on the financial info contained in federal tax form Schedule K-1. It’s prudent to check it carefully.”
– Gary Bode, S Corporation CPA and rental property accountant

Federal tax Form 1120-S has plenty of quirks. But I find most S Corporation clients understand it. And of course I answer any questions they might have. Most Landlords understand federal tax form 8825. But Schedule K-1 is different. The allocation of income and rental property activity to the Shareholders is only one issue. Have your S Corporation CPA explain Schedule K-1 if you don’t understand it. Why? The S Corporation is a pass through entity; Schedule K-1 contains the information the IRS taxes you on when it flows into Form 1040.

Our virtual office can handle your S Corporation’s Form 1120-S, Form 8825 and Schedule K-1 regardless of where you live.

I’m a rental property CPA and run my practice as an S Corporation. There’s rental property in my extended family. So I keep up on current issues with S Corporations and rental property. For a free phone consult call (910) 399-2705.

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2 comments to S Corporation CPA Accountant discusses Schedule K-1 when using Form 8825 to report Rental Property | federal tax form 1120-S | federal tax form 8825| federal tax form Schedule K-1

  • Peter

    I am running a motel in California and wanted to create a LLC to report the income and expenses. I am thinking to report on form 8825 under commercial building code. Is that correct? If not, which form is correct.

    • Well Peter, an LLC can choose to be taxed as a single member LLC, a C Corporation, an S Corporation or a Partnership. Pro and cons of each are beyond the scope of a comment. Only S Corporations and Partnerships use Form 8825. SMLLC uses Schedule E. Hope that helps.

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