# foreign rental



## 167juliar (Feb 23, 2015)

American abroad has a studio with NRA spouse and just read somewhere that not only need to file Schedule E this year with 1040 but 8858 and maybe more. Anybody know about this? 
and is this a "disregarded entity"? thanks


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## Bevdeforges (Nov 16, 2007)

I'm moving you over to the Expat Tax section where you should be able to get some responses on this. (It's not a uniquely French issue.)


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## 255 (Sep 8, 2018)

167juliar -- A disregarded entity is an entity that for U.S. tax purposes is folded into another entity, the entity usually doesn't have a U.S. income tax reporting requirement, in it's own right. A couple of examples: a. a single member LLC does not file a separate tax return, but is included on the member's own form 1040 utilizing schedule C (or the owners' 1065, 1120 or 1120 S depending on the status of the owner,) b. a wholly owned subsidiary of a U.S. corporation's income taxes would roll up to the corporation's form 1120. In the second case, it appears the 8858 (information return) would be required, if the subsidiary was overseas.

In example a., the company would be a disregarded entity by virtue of the way it was formed (a lot of real estate investors do this.) In the second instance, b., the owners would have had to purposely make an election to designate the "foreign" company as a disregarded entity. There are certainly reasons to designate a business as a foreign disregarded entity and there are reasons not -- rather to use standard reporting for operating an overseas company.

From the IRS website: "Schedule E (Form 1040) (is used) to report income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in real estate mortgage investment conduits (REMICs)."

The main take-away is you have choices. I do not know enough from your post to make a solid recommendation (there are certainly a lot more moving parts that we don't know however, say you routinely file your U.S. tax return as married, filing separately, to eliminate the need to file your NRA spouses income -- similiarly, if the studio is 100% owned by your spouse, (or a company owned by your spouse) you would have no U.S. reporting requirement for this enterprise. Cheers, 255


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## Bevdeforges (Nov 16, 2007)

Also see the IRS page on "disregarded entity" https://www.irs.gov/businesses/smal...yed/single-member-limited-liability-companies

From that page:


> For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832


Basically it means that, unless you file form 8832, you just report the rental income as your own income on your tax returns. (Which then begs the question whether and how you normally file, since you may wind up only reporting half the income from the property as only half owner - if you normally file as "married, filing separately.")


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## 167juliar (Feb 23, 2015)

OH thank you so much. So married filing separately with a NRA husband I would just need to file a Schedule E as usual with regular 1040 for renting small studio we own. (and do no services for). 
Thank you soooo much for the information.


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## 255 (Sep 8, 2018)

167juliar -- Yes, Form 1040 Schedule E should meet your reporting requirements, assumming you own the property personally. You'll also have the opportunity on sch E to deduct some of the expenses of owning the property. If you maintain a separate escrow account to recieve rental income, you'll also have to report that on the FBAR, if you meet the reporting thresholds. Make note of Bev's comment if you are a 50% owner.

If you own the property personally, filing jointly or separately makes no difference in your schedule E filing requirement -- it just allows you to eliminate filing your NRA spouse's income if you file separately (assuming he has no filling requirement as a U.S. permanent resident.) If he still has a filing requirement, filing jointly may be to your advantage (at least until he relinquishes his green card.)

If the property is hold in the name of a foreign corporation, you'll have an IRS form 5471 reporting requirement. Cheers, 255


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## 167juliar (Feb 23, 2015)

Thank you!


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