How to put in Partners leaving LLC?

[Kpeabody]

For a 1065 return

There are 3 partners that each own a third. (well one of them owns 34% and the other 33%)

On October 31st, one of the partners left the LLC. He received a final payout on 12/31/20 which was equal to 1/3 of the cash on hand. No other payments will be made to this partner. 

The remaining partners will now be 50/50 partners going forward. 

How do I go about putting this into proseries? I did a few things (Ie clicked "final k-1" for the partner in question and adjusted the ownership percentages but I feel like I am missing something.)

[qbteachmt]

"He received a final payout on 12/31/20 which was equal to 1/3 of the cash on hand."

Who guided them on this? Because you describe: He got his share of funds on hand.

That means there is Nothing else of value that would be his? You cannot buy him Out of the partnership with his own Equity (share of funds on hand).

However, the other two partners can buy him out, personally. That would be after taking into consider the Value of his third, of course.

[sjrcpa]

A partnership can redeem a partner's interest.

[sjrcpa]

Departing partner's capital account gets reduced to zero. The amount needed to do that increase the other two partners capital accounts.

Did you enter the change in ownership dates? That way K-1 items get allocated according to the prorated ownership period.

Form 8308 is probably needed.

The amount paid to the departed reduces partnership capital.

There's probably more. Partnerships ain't easy.

[qbteachmt]

"A partnership can redeem a partner's interest."

It isn't clear if they allowed the person to "take their ball and go home" or if they intended to buy them out of their Share of the value, though.

"Here's a third of the money; we're going to ignore that the partnership owns $2m in real estate, and the mortgages are half paid down."

🙂

[Kpeabody]

I'm in the process of digging down further with the partners. But the situation seems to be that all 3 were in agreement regarding this. IE the partner that left wanted to cash out. Which was simple for them since they don't have any assets/real estate/etc. Just whatever was in the bank account. 

[dd4vols]

@sjrcpa late night brain fart.... i can't find/remember where i enter these dates of the change..

DISREGARD... I just found it... 'Addl K-1 Info"

[jlew1229]

Found this thread.    I have a similar situation.  Redemption agreement done.   No assets, loans etc either.    3 Partners   Departing partner's distributions and subsequent buyout exceeds basis by $3200.00.    Buyout came from the partnership cash, not the individual partners cash outside the partnership.   

Should this payment over basis be handled differently than just listing it as a distribution on the K-1? or does the departing partners basis goes to 0,00 and the $3200.00 is listed elsewhere   

Do I need to fill out form 8303.   I started to fill it out , but it appears to have only one line for Transferee and both remaining partners % changed.  

Thanks