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Hi, my name is Mark. I will be happy to help you with your questions.
I assume that this is an LLC?
just a partnership.
You are correct that the COD income would flow through to each partner's K-1 based on the partnership agreement. Yes, if the individual partner filed a chapter 11 bankruptcy then this amount would be excluded from income.
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Please let me know if you have any other questions or need clarification. I am happy to help.
It should be on the K-1. You should adjust for it on Form 982. I assume that you mean leave it off when your inputting the K-1 in the individual return.
The 1065 loss will not have an impact to the COD treatment
Can you give me approximate numbers. For instance what is the loss of the partnership? What is the COD income?
Ok so the COD is changing the loss to $10,000?
Ok the cancellation of debt income should be reported on Box 11 E of the K-1 and should not impact the ordinary loss of the partnership.
It sounds like it is hitting the wrong box on the k-1. You are correct. This amount is not taxable to the individual.
Please let me know if you have any other questions. I am happy to help.