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We are three members in an LLC. I bought one of the smaller…

Hi, We are three members in...
Hi,
We are three members in an LLC. I bought one of the smaller member. I bought member number 3.
Since I am in charged of filling the 1065, I understanding that I will have to file Form 8308 but how do I report the buyout amount of the member number 3 K1?Should it be listed as capital gain for member number 3 or guaranteed payment for member number 3 (on his K1)?Please help.
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Answered in 6 hours by:
3/13/2018
Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,269
Experience: Adjunct Professor
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Hey! I'm Carter, I'm a CPA and can help you out.

The buyout is not reported on the K-1. The partner will need to calculate his own basis and the amount he received in order to determine his gain or loss on the personal level.

Let me know if you need anything else. If not, please leave a rating. Thanks!

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Customer reply replied 4 months ago
Thank you!
This might get more tricky. The partnership was the payer. In other words, since I have a good amount in my tax basis, I ask the partnership to cut a check from the partnership account to payoff the member number 3.The partnership didn't report it as an expense but a reduction of my tax basis (similar to a withdraw).If the amount is not reported on the SCH k1- should I still ask the partnership to issue a 1099 to member 3. My concern is that the IRS may see the partnership as a payer but no reporting was done to the IRS.Please help.

No 1099 is needed.

What is sounds like is you are technically the payor. The distribution to you was used to pay for Partner 3's share.

For the IRS, they would just see that is how you booked it. So really it is a payment from you to Partner 3. Under that you shouldn't have anything to supply him and nothing should be on a K-1 besides the distribution.

Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,269
Experience: Adjunct Professor
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