How do I report a departing LLC member?

Forum|Forum|6 years ago
December 7, 2019
1 reply
10 views

An LLC member is bought out of a 3 member LLC for $18K. His capital balance was $6K at the time. So there is a $12K negative capital balance left on the balance sheet for this member.

There are no hot assets or debt - only cash and fixed assets.

The buyout agreement states that the company will buy out the member. Another member also contributed $18K capital and is now a 2/3 member while the other remaining member remains a 1/3 member. This probably is irrelevant.

How do I report this in PS? The departing member's capital balance is showing negative $12K. Do I simply enter a positive amount for $12K in the "Other Adjustments" line on that member's K-1 Wks?

Where is the $12K negative balance reported in the balance sheet and the tax return?

Thanks.

ProSeries Professional

This topic has been closed for replies.

Best answer by TaxMonkey

Are you familiar with IRC 754 election and partnership basis adjustments?

Regardless, the capital account of the partner being bought about must be zero, so a phantom contribution should be made to zero out his capital account. The will result in a phantom asset on the partnerships balance sheet. This will be non deductible to the partnership, baring a 754 election and all that entails.

T

TaxMonkeyAnswer

Level 7

Are you familiar with IRC 754 election and partnership basis adjustments?

Regardless, the capital account of the partner being bought about must be zero, so a phantom contribution should be made to zero out his capital account. The will result in a phantom asset on the partnerships balance sheet. This will be non deductible to the partnership, baring a 754 election and all that entails.

D

david3Author

Level 7

Doesn't the IRC 754 election apply to a purchasing member? The LLC bought out the member.

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