Tax Law (Questions About Taxes)/Final Form 1065 return

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Question
Hello John,

I filed a final Form 1065 for LLC for the year ended 12/31/2008.  One of the members never filed a personal return which we are in the process of preparing now.

The LLC began as 2 member NY LLC being taxed as a partnership beginning in 2007.  By the end of 2008 the other member wanted out of the LLC and therefore the partnership ended.  My client has been operating as a single member NY LLC since 2009.

Regarding my client's 2008 Form 1040 and his final K-1.  On Schedule K-1 Add'l Info Part II Disposition of Partnership Interest.  In this situation do we have a fully taxable transaction?  Upon ending the partnership in 2008 and beginning 2009 with all of the assets and liabilities from the partnership.  My client's basis as of 12/31/08 was $22,175. Is the sales price the fmv of the assets and liabilities less his basis determines a gain/loss?

Thank you in advance.

Jeff

Answer
Jeff,

Thanks for your question.

I presume that you are still utilizing the same EIN number. You don't have a taxable transaction, as he did not sell his interest in the business. It is still the same LLC,the only change that occurred is that it is now being taxed as a sole proprietorship instead of a partnership.

However, the fact that you filed the 1065 as a final return may complicate the issue. You should have filed a Form 8832, changing how the entity was to be taxed.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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