For the LLC holds the rental property, my question is if this LLC is on a loss every year due to deduction plus depreciation, will IRS eventually give me trouble on it or force it to close down? Thanks!
No, as long as what you’re claiming is reasonable.
First, your return has to be incorrect or somehow breaking a rule. If what you’re doing is logical and honest, there’s no problem (or, any problem is easily solved). But, even if you aren’t…
Second, the automated systems that review returns would have to flag it, meaning something about the return would have to be atypical. Returns can be incorrect but typical and no one’s going to notice.
Third, the numbers would have to be unreasonable. Depreciation is the part that looks odd to our human brains, but the automated systems are aware of the pieces that make up the paper loss – and it’s very common to have net income, but a loss after depreciation… Even for many years.
Fourth, even if something were flagged as atypical, they’d have to care enough to look into it. Likely, this would be a letter from them seeking information.
Fifth, it’d have to be worth their while to take action. Given limited resources, they’ve got better things to do than go after small amounts of money that is (mostly) following the law.
I’m not suggesting anyone file incorrect returns, just saying that returns that look like other returns are going to be ignored.