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Partnership tax allocations. I have a partnership and invest and hold real estate. I established utilities on a rental property

San Jose, CA |

under my personal name. The property is held on title under the LLC. We are preparing the tax return and are deducting the utilities on the 1065 partnership / LLC return; the LLC paid the utilities from it's bank account. Again, the utilities are in my name, thats how the utility company wanted it. Must the utilities be in the name of the LLC to avoid deductibility issue with IRS? Or is it logical and accepted that I, one of the managers, placed utilities under my name for operational reasons?

Attorney Answers 3


  1. I really don't see a problem with placing the utilities in your name. It appears very obvious you are acting as an agent for the LLC. I can't imagine this would come under any serious tax inquiry. If the records and books for the LLC back up your contentions, then I really think you are pretty bullet proof in this regard.

    I hope this is helpful.

    John N. Kitta
    Fremont

    If you have found this information helpful, please let the attorney know by marking best answer. Thank you. This participating Attorney does not warrant any information provided, nor are we creating an Attorney-Client relationship by providing said information to you on this site. Nothing contained herein is intended to constitute, offer, induce, promise, or contract of any kind. The content provided is presented as a courtesy to be used only for informational purposes and is not represented to be error free. The Law Offices of John N. Kitta makes no representations or warranties of any kind with respect to its answer to inquiries, and such representations and warranties are being expressly disclaimed. Given limited facts, we are attempting to share relevant information concerning this area of the law as a public service.


  2. We must qualify this answer by first, recommending calling your CPA. But, typically LLC paid the utilities, the LLC gets the deduction. Now, from a legal standpoint. You might want to avoid putting ANYTHING in your personal name without qualifying it as you are the Agent for the LLC, or Managing Officer. This will avoid any problems later for non-payment by the LLC. We lawyers evaluate from a downfall perspective. So, if the LLC fails to satisfy the debt, you don't want to be personally liable. The Utilities is protecting themselves by putting a name on it. Try to avoid with other venders unless you have to issue a personal guarantee. At that point, you need to sit down with any other partners of the business and figure out who is going to take that responsibility, or if all of you will.

    Tim Broussard
    Kring & Chung, LLC
    949-261-7700
    tbroussard@kringandchung.com

    This email does not create an Attorney-Client relationship.


  3. It is not a great idea to have the utilities in your name if the property is in the name of the partnership. However, if that was required by the utility, try to have some written evidence of that requirement in your files. In balance, no, it should not be a problem that the utilities are in your name and the LLC pays the bill.

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