LLC sold during tax year how do i prepare the returns for both the buyer and seller?

Forum|Forum|4 years ago
August 30, 2021
15 replies
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PATAX

Level 12

Maybe provide more information and details and someone may be able to help you....

M

Maribeth-MartinAuthor

Level 3

An LLC taxed as a S-Corp, with 2 members, sold on the 1st of October, 2020. The Seller and the buyer are both my clients. How do I handle the tax return? The sellers had 75%and 25%. the buyers will have a 50/50%. The sellers have income and expenses from 01-01-2020 thru 09-30-2020 and the buyers have income and expenses for 10-01-2020 thru 12-31-2020. It is one entity. I was told to file a short year tax return for both? I have never heard of doing that? now I'm confused.

dkh

Level 15

Was it a S Corp stock sale or asset sale?

If stock sale and If the buyers and sellers agree to this - you file one tax return with the income/expenses allocated based on actual amounts for the actual time period owned. Must make an Sec1377 election on the return. Enter Date of Changes in Ownership on SmartWorksheet. ProsSeries does not have a worksheet for calculating the correct amounts per shareholder - you will have to override the K1s.

I had SCorp that had a stock sale twice in one year. I used P&Ls to get the correct information on return and correct amounts per each shareholder. Takes some time but it can be done.

Option 2 for a stock sale is to prorate the year to date totals by ownership percentage. Enter Date of Changes in Ownership on SmartWorksheet. ProSeries will (should) do the calculations.

M

Maribeth-MartinAuthor

Level 3

It was a stock and asset sale both.

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