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Phillip B, EA
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 704
Experience:  Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
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This is a tax related question. I formed an 2 member LLC

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This is a tax related question.

I formed an 2 member LLC (partnership based) with my wife this year.
Since it's a flow through entity, is it mandatory to file a partnership return for the LLC?
If I open a brokerage account for this LLC and transfer my stocks from a joint account how would the cost basis be calculated? Can I carry over from my old account?
Thanks for using! I will do my best to provide you with a clear and concise answer to your tax question based on the information that you have provided.

You will need to file form 1065 for this entity each year since you have organized it as a LLC. The schedule K-1s from form 1065 will be the information the IRS uses to match the LLC income to your form 1040.

If you transfer your stock under the LLC, the cost basis on your stock will remain the same as if you retained the basis under your own name. Any capital losses carryover that you currently have will continue to be carried over. I don't believe there would be anything that could prevent you from carrying your personally owned stock to your LLC, but you may want to inquire with your broker to be sure.

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Customer: replied 3 years ago.

Thanks for the answer. When I formed the LLC I was told it's not required to file tax returns for LLC since it's a flow through entity. Apparently this is not correct.

I wanted to avoid forming an LLC just for this reason - need to file tax returns.

For this year, if I don't have any activity in the LLC, do I still need to file a tax return?


My broker has no problems transferring the stocks in our joint account to the LLC account.

If this is the first year, I would not bother filing if there is no activity. The IRS most likely will not look for a return for the LLC this year unless someone issues a 1099 in the name of the LLC. If the IRS does write you to request the return, there are safe harbors that would protect you from penalties.

Let me know if this helps.
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