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Again per attorney, original owner will lend the new "partnership" the money to open a new location. The new member has to forgo his draws up to the amount of that loan before he can "take" a draw based on profits.
So on the original owners 1040, the money received has no basis. He says "it's the right to come in on a good business". Are we talking "goodwill" here?
Thank you.
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You really need to get the answer to this from the attorney and the paid tax professional that is involved. To me, your description makes no sense. It really started to sound like a sale of a partnership interest which may or may not have basis, but then some other right comes into play.
If you are a paid preparer, get a really large retainer before taking this mess on.
Answers are easy. Questions are hard!
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Since the attorney is involved, you should have a partnership agreement that spells all of this out. Ask the client for a copy of the partnership agreement. Then tread lightly on what returns and what work you are willing to do until you understand the ramifications of that work.
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The more I know the more I don’t know.
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The more I know the more I don’t know.
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Slava Ukraini!
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P.S. my spell check burped on attornies, so with the help of Dr. Google it was happy with attorneys.
P.P.S. I get distracted easily
Answers are easy. Questions are hard!
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Slava Ukraini!
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Slava Ukraini!
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I'd worry more about the IRS being happy.
OR, let the attorney do the tax return, since s/he appears to be so, so knowledgeable.
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And worry about putting your neck on the line...
... even if you make a disclosure, there has to be a reasonable basis for the position.
Still an AllStar
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The more I know the more I don’t know.
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That IF crossed my mind too

Slava Ukraini!
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The more I know the more I don’t know.
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Is that even possible @IRonMaN
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Slava Ukraini!
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