The IRS makes it confusing, but hereu2019s a trick to understanding it.The Taxpayer is not taxed, the income is taxed.The IRS does not tax ownership of assets (wealth), only income.The person to whom the income is assigned, now identified as the u201cTaxpayer,u201d is responsible for reporting the income, and for paying the taxes.The LLC partnership will file a Form 1065 information return, which will show the income and expenses and then the profit (net income).The form will include a Schedule K-1 (Form 1065) for each partner which will show that partneru2019s share of income/loss, deduction, credits and other items.The partner will transfer these numbers to his personal tax return, Schedule 1040, on Schedule E, and elsewhere, based on the instruction that will be included with the Schedule K-1.There are two very important things to note.1.) Once the Form 1065 is filed, and a copy of your Schedule K-1 is sent to the IRS, you will be expected to pay the taxes on the income, whether you receive it or not. If the LLC retains the money to do renovations, or any other reason, you still owe the taxes.2.) With a partnership, your percentage of income allocation does not have to match your percentage of ownership, if the Operating Agreement of the LLC assigns a different amount.I hope this helps.Good Luck.Michael Lantrip, Attorney | Accountant | InvestorMichael Lantrip