Down payment on Investment Property paid from a Ltd Partnership

[ajgowen]

Hi Doug - We should know this but now we're not sure.  Last year my wife and I purchased a new investment  rental property. We paid approx. 10% as a down payment from our Limited Partnership account that we use for our real estate investment expenses.  The 10% was part of the settlement statement (line 303) of cash from borrower.
Because we paid for the property out of our LP, is any of that down payment deductible as an investment property expense in our partnership's name?  or deductible in general?  There's no where to account for it on the Form 4562 for depreciation.

[Douglas Rutherford, CPA]

A downpayment is not an expense and is not deductible.  However, the total cost of the property (downpayment plus debt) is capitalized and depreciated using Form 4562.  This is filed with the partnership return (Form 1065) along with the income and expenses of the property.

The net income/loss is reported to its partners on Schedule K-1.  Each partner then reports their share on Form 1040.