Q1. Does that mean our basis in the partnership is zero?
Yes, it means your tax basis in the partnership is zero presuming there are no partnership liabilities.
Currently the LLC is around break even and there is enough cash flow to pay ourselves around 3k per month each....Is this 3k taxable?
If this is taken as a guaranteed payment than it will be taxable and reported as guaranteed payment on the K-1. It will also be subject to self employment tax on your personal tax return.
If this is a draw(distribution) against profit than the income or loss will flow through to you via K-1 and be subject to tax on your personal tax return.
Or do you just wait to see at the end of the year what the ordinary business income is on the K1 to see how much tax to pay?
You do not have to wait until the end of the year. Tax in either case will be due on your personal tax return.
What if the LLC shows a loss again? Can I have a negative basis and offset the loss against income?
If the LLC shows a loss again than you may not be able to use the loss since you do not have a tax basis.
If you take a distribution in excess of basis (since you do not have a tax basis) than this would be taxable as capital gain to the partner.
see section 731 in the link below for detailed info-
Let me know if you have any question.
Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.