Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

Final F1065. One member bought out the other – following Rev…

Customer Question
Final F1065. One member bought...
Final F1065. One member bought out the other – following Rev Rul 99-6. Pship makes liquidating distributions to both partners; then one bought from another. Pship has assets & liabilities. Buying partner assumed liabilities. Both partners have negative capital account. I understand gain/loss is computed using basis and has nothing to do w capital acct. What happened to the negative capital account?
Submitted: 2 months ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Customer reply replied 2 months ago
Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call.
Customer reply replied 2 months ago
Let me know if you need more information, or send me the service offer(s) so we can proceed.
Answered in 13 minutes by:
5/30/2018
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,894
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Hi. …. My name’s Lane,

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents, since 1986.

I’m reading your question now.

Bear with me a couple of minutes while I type up my response.
….
Then if you have further questions we can go from there.

(If the site makes one of those automated phone call offers, that DID NOT COME FROM ME. It’s an automatic offer that the site throws up there, I’d be glad to discuss this over the phone but the site charges more for that. Only accept if you’d like a call.)
Ask Your Own Tax Question
Customer reply replied 2 months ago
Hi Lane: Don't need to do phone call for now. Want to confirm if you are still the person helping me?
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago

I am, and yes, as I mentioned above, no need for a call unless you'd like, just keep declining (wish the site didn't do that)

Ask Your Own Tax Question
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago

I'm not so sure that ANYTHING needs to be done... You're correct that this is an outside basis issue and amount of distribution issue under RR 99-6.

...

Give me a little more time if you would

Ask Your Own Tax Question
Customer reply replied 2 months ago
Take your time.
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago

Yes, I see NOTHING that says (although this makes bookkeepers tear their hair out sometimes, becasue of the "need" to see things balance) that any adjustment needs to be made.

...

Just pulled up a return we did four years ago that I remembered. I added a "see statement" to section L, (ending capital account line), next to the negative number ... and on the statement said "Your capital account is the balance at dissolution of the partnership. Consult your tax advisor"

...

Never had a problem with it. Also consulted a colleague (JD, LLM) and she smiled and said, "It is what it is. You must report this accurately, as information for the tax preparer that does the partners' 1040."

Ask Your Own Tax Question
Customer reply replied 2 months ago
Thanks for your response. I am not able to connect the two sides - partnership and partner. How does the partnership closes its book and have zero balance sheet? When partners have un-restored capital account, aren't they suppose to have capital gain?
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago

The gain is a partner 1040 issue. You report the ending capital account as it is.

Ask Your Own Tax Question
Customer reply replied 2 months ago
we have two gains? #1: un-restored negative capital account #2: Sec 741 gain on sell of partnership interest?
Customer reply replied 2 months ago
Maybe it's easier to put some numbers in. MMLC to SMLLC on 12/31/17. LLC asset is bldg - $1mil FMV, adjusted basis f $600k. LLC has N/P $900k. Partner Joe bought out Partner Sandy. Per RR 99-6, LLC makes liquidating distribution of asses and liabilities (actually 99-6 does not mention liabilities). Both have outside basis of $300k as of 12/1/17. In arriving at 12/31/17 basis - Does buyer partner's basis increased by the additional loan assumption? At the LLC level, capital account will reduced by the property distribution, net of liabilities, is this correct?
Customer reply replied 2 months ago
I need to go for now, how do I get back in touch with you for follow up?
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago

You certainly have a gain for the seller. Would have to know the person's outside basis and distribution amounts to calculate the gain.

...

Buyer's basis DOES increase because of loan assumption.

...

And yes, Capital account is reduced by distributions and final year losses ...

..

But debt affects outside basis and capital account differently

...

Under Section 752, any increase or decrease in a partner’s allocable share of partnership liabilities will cause the outside basis of his partnership interest to increase or decrease.

...

But a partner’s capital account is not increased or decreased by partnership liabilities.

Ask Your Own Tax Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Lane Your Own Question
Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,894
14,894 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

Lane is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,512 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,569 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
Lane, you have me great advice last year. I have a new
Lane, you have me great advice last year. I have a new question for you... I have a final llc/partnership return that is showing a balance on the investor members capital balance. Is this ok? Would th… read more
Lane
Lane
JD, CFP, MBA, CRPS
Doctoral Degree
14,894 satisfied customers
I have a 501(c)(7) social club that is going to liquidate
I have a 501(c)(7) social club that is going to liquidate its assets and distribute net assets to its members under a plan of liquidation. My understanding is that this does not result in loss of tax … read more
taxmanrog
taxmanrog
Master\u0027s Degree
1,062 satisfied customers
I am trying to seek clarification on the following issue: I
Hi Pearl. I am trying to seek clarification on the following issue: I have a partnership with two partners and one of the partners left the partnership. I do not think it was a buyout as one of the pa… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I have a question about the tax consequences of disposing of
I have a question about the tax consequences of disposing of my member interest in an LLC.… read more
Lane
Lane
JD, CFP, MBA, CRPS
Doctoral Degree
14,894 satisfied customers
Three general partners in a general partnership which owns
Three general partners in a general partnership which owns improved real property subject to mortgage, which has been refinanced over time with each of the partners taking out cash and each has a nega… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
There, I have an LLC that is a leasing company taxed as
Hi there, I have an LLC that is a leasing company taxed as a partnership. One member with a negative capital account of approx. $60K has retired. He will not be paid for his interest. The negative cap… read more
Lane
Lane
JD, CFP, MBA, CRPS
Doctoral Degree
14,894 satisfied customers
I have a client who started an LLC in 2014 with 2 other
I have a client who started an LLC in 2014 with 2 other partners. there was a small loss in 2014, the 2 other partners did not have basis to take the loss, they had contributed nothing. They have agre… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
We have a ltd partnership with a $5mm building (currently
We have a ltd partnership with a $5mm building (currently worth $5mm) with a recourse loan of around $2mm. The GP can refinance the building into a $3mm NON-recourse loan take the proceeds and distrib… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I am preparing the tax return two member LLC taxed as a
I am preparing the tax return for a two member LLC taxed as a partnership (Form 1065) that had one rental property. It is owned by two brothers 99% and 1%. The LLC short sold the rental property for $… read more
Lane
Lane
JD, CFP, MBA, CRPS
Doctoral Degree
14,894 satisfied customers
We are completing a form 1065 LLLP final tax reurn due to a
We are completing a form 1065 LLLP final tax reurn due to a technical termination under sec 708(b)(1)(b) due to a 51% change in ownership interest. My question centers around the k-1's. The new partne… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
My question centers around the taxability of the sale of a
My question centers around the taxability of the sale of a partnership interest. I am aware it is a capital gain and I am aware of the sales price as the amount received. There is no debt on the partn… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
A LLC filing taxes as a partnership . If one of the
A LLC filing taxes as a partnership for 2014. If one of the partners invested 25,000 and the other two invested no capital but they are 33% 33% and 34% partners how should the 25,000 have been entered… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I'm filing the final partnership return for a company that conver
I'm filing the final partnership return for a company that converted from a LLC to a C corp. The LLC had a negative basis of $380,000. I'm being told that I need to report a gain of $380,000 in order … read more
BK-CPA
BK-CPA
Bachelor's Degree
687 satisfied customers
Im reporting the installment sale of a partnership interest.
I'm reporting the installment sale of a partnership interest. Part of the total payments is for unrealized receivables, reported as ordinary income. How do I report the unrealized receivable portion o… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
S Corp bought land, build property and faced foreclosure.
S Corp bought land, build property and faced foreclosure. Total cost was 2.6 mln. On foreclosure we have the following: Bank amount due $2.3 mln, Interest 45k, Publication costs 575.00 Attorney Fees 1… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
Two member LLC taxed as a partnership. 85% partner agrees
Two member LLC taxed as a partnership. 85% partner agrees to sell his Interest to the LLC for $15,000. Partnership is terminated and remaining partner becomes sole prop/disregarded entiry. Selling par… read more
DanielleCPA
DanielleCPA
Certified Public Accountant
Bachelor's Degree
76 satisfied customers
Ordinary or Capital Gains for a partnership loss Hello, I
Ordinary or Capital Gains for a partnership loss? Hello, I worked for a small investment firm where I was offered the opportunity to buy into the partnership. I bought in for 200k and 3 years later, t… read more
MequonCPA
MequonCPA
CPA Firm Owner
Master's Degree
2,165 satisfied customers
I have a partnership with 2 partners who are selling all of ...
I have a partnership with 2 partners who are selling all of their interest in the partnership (59%). I will then own 100% of the partnership. The only asset of the partnership is an office building. W… read more
jgordosea
jgordosea
Enrolled Agent
Bachelor's Degree
2,885 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x