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Level 2
August 25, 2021
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Partner in a 2 member LLC died in the first qtr of the tax year,can the LLC still file a partnership final return for the tax year in question ?

  • August 25, 2021
  • 3 replies
  • 31 views
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Best answer by sjrcpa

What happened to the deceased member's interest? Presumably it went to his estate until the estate process was wrapped up, so yes you still have a partnership. K-1s to living member, deceased member for period he was alive, and deceased member's estate for rest of year.

3 replies

PATAX
Level 12
August 25, 2021

I think the partnership ended on the date of death of the partner... And then it is a sole proprietorship after the day of death.. I may be wrong but that is my opinion...

sjrcpa
sjrcpaAnswer
Level 15
August 25, 2021

What happened to the deceased member's interest? Presumably it went to his estate until the estate process was wrapped up, so yes you still have a partnership. K-1s to living member, deceased member for period he was alive, and deceased member's estate for rest of year.

The more I know the more I don’t know.
PATAX
Level 12
August 25, 2021

@sjrcpa I thought a 50% or more change in Partners technically would end a partnership but that must be wrong...

BobKamman
Level 15
August 25, 2021

Just another example of how people who are sold an LLC may have no idea what they're buying. 

https://businesslawtoday.org/2019/07/sole-members-death-modest-proposal/

https://businesslawtoday.org/2020/01/death-llc-member-part-ii/ 

Intuit Community Champion
August 25, 2021

Good article from Tax Adviser "two-person partnership does not terminate upon a partner's death if the deceased partner's successor in interest (usually the estate) continues to share in the partnership's profits or losses (Regs. Sec. 1.708-1(b)(1)(I)). The partnership's tax year does not close, and the partner's distributive share of partnership income from the date of death through the end of the partnership tax year is reported on the tax return of the successor in interest (Regs. Sec. 1.706-1(a)). Likewise, if a partnership begins or continues to make liquidating payments to a deceased partner's successor in interest under the provisions of Sec. 736, the successor in interest is treated as a partner until the deceased partner's interest in the partnership has been completely liquidated (Regs. Sec. 1.736-1(a)(1)(ii)). In a two-person partnership, the partnership does not terminate, nor does the partnership year end (other than the partnership's normal tax year), until the final liquidating payment is made to the successor in interest (Regs. Sec. 1.736-1(a)(6))."

Here is link: https://www.thetaxadviser.com/issues/2015/aug/accounting-for-death-of-partner.html