Dear LLC Transactions,
It seems that the bot***** *****ne is that you want you, the partnership (LLC), and the other owner all have no tax effect through this transaction.
1) It is hard on you to start with. Are you sure that you will have no gain and no loss?
2) The other partner, is s/he going to receive a no gain and no loss on this transaction by what she is going to put out?
3) The partnership itself is likely and easier to be no gain and no loss if somehow its buy back and sell of the stock is of the same value.
Would you please think about these questions? Accounting entries is the secondary consideration. If all entries only touches the balance sheet items, in cash, and in equity account for owners' capital accounts, of course, there is no P/L impact. In a way, the accounting journal entries are the easier ones. Accounting entries reflects reality. But if you report as partnership, the change in the ownership, distribution, and inside and outside basis will have tax effect on partners, on their individual tax returns. This transaction does not affect the earnings on the K-1. But it is likely to affect the partners' bases in the partnership.
Please feel free to follow up with questions. Otherwise, I am ready to be evaluated by your satisfaction of my answer to your question.
Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP