I co-own a rental property with a relative. We receive rent and pay expenses to/from a joint bank account. Is it possible for me to report all the income and for my relative to report all the expenses on our individual tax returns?

ANSWER

The BIDaWIZ Team's Answer:

The short answer is that co-owners of rental property must report income & expenses in accordance with their ownership interest in the property. Therefore, your relative would report their share of income/expenses and you would report your share on you the appropriate tax form. Typically, it is reported via Schedule E as a non-passive activity. However, it would be helpful if we had more details from you. Is the property incorporated or a disregarded entity and do you provide services? Please note that an unincorporated organization with two or more members is generally classified as a partnership for federal tax purposes if its members carry on a trade, business, financial operation, or venture and divide its profits (Per IRC Section 761(a)). However, a joint undertaking merely to share expenses is not a partnership. For example, co-ownership of property maintained and rented or leased is not a partnership unless the co-owners provide services to the tenants. If you are not required to file a partnership return, each of you should file a Schedule E reporting 1/2 of the income. If one person pays for expenses and is not reimbursed by the other co-owner, you should report all of the expenses paid for on your Schedule E.