Over the past few years, we have been seeing more U.S. properties being purchased by Canadians using a Limited Liability Partnership (LLP) structure. The LLP structure can be used to minimize legal liability risks, while allowing preferential tax treatment of a flow-through entity to the individual partners.
The partnership must file a 1065 U.S. Return of Partnership Income to report the income and expenses of the property. The 1065 return is an information return and hence the partnership does not pay taxes. The income is flowed through to each partner, based on their percentage ownership of the partnership. The 1065 return is due on the 15th of the fourth month after the year-end of the partnership.
Each partner receives a K-1 from the partnership, which indicates the partner’s proportionate share of any income or loss from the partnership. Each partner must then report this income on their U.S. tax return. There may also be State and Local tax returns required.
by: Peter Cuttini, CA, CPA
U.S. tax returns can be complex. We strongly advise that you consult with an experienced cross-border accountant to assist in completing the tax returns.Tags: LLP, ownership, real estate, US, US Property