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I have an LLC which has two patners A-60% and B-40%. B buys…

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I have an LLC which...
I have an LLC which has two patners: A-60% and B-40%. B buys A 6/17/09. A is owned by a S-Corp. None of the sale proceeds flowed through to the LLC, it all went to the Corporation. How do I show the sale on the 1065 for the LLC?
Submitted: 8 years ago.Category: Tax
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Answered in 41 minutes by:
6/15/2010
Tax Professional: BK-CPA, Certified Public Accountant (CPA) replied 8 years ago
BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 933
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The overall tax law involving the sale of a partnership interest can be complex, so this will be a general answer in nature.

 

The LLC, having been purchased and now fully owned by 'B,' will continue in existence as a sole proprietorship for tax purposes in the absence of special elections, assuming 'B' is a person.

 

The partnership will cease to exist (it's no longer a partnership). When you close the partnership's books, all accounts will end up with a $0 balance, with all the assets and liabilities having been purchased / distributed by / to the former partners.

 

'A' will recognize a gain or loss on the sale of the interest purchased by 'B,' assuming related party rules don't apply (could stall a loss), etc. 'A' will record this gain or loss on 'A's own return.

 

'B' will assume a basis in the assets and liabilities purchased, equal to the purchase price, which is allocated to each asset and liability separately. 'B' will then proceed to depreciate business assets accordingly, etc., if 'B' continues to operate the LLC as a business.

 

Let me know if you need more clarification.

 

Thank you for your question.

 

 

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