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Tax Law (Questions About Taxes)/Real estate contract expenses from bad deal

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QUESTION: Hello,

My partners and I have an LLC in Washington.  We attempted to purchase a parcel, investing $18k in research and surveys, then the Seller no-shows at signing and walks on the deal.  He leaves us with about $18k in expenses from both the Feasibility Period and other expenses related to closing the deal.  

Our LLC doesn't have a business license yet as we have not conducted business yet, we are a brand new LLC for this year started to purchase the commercial land enroute to becoming a Leaser of property later next year.

Can we deduct our losses from this deal out of our individual tax returns?  And if so, since there are three of us, would it be equally split ($6k) or as the percentage listed on the operating agreement?

thanks!

ANSWER: Did the LLC actually write the checks? If so then the LLC would declare it on their 1065 informational return, and attribute the business expense to the owners. LLC's do not "have" to distribute equal to ownership interests.





---------- FOLLOW-UP ----------

QUESTION: Yes, the LLC did.  I asked about the equal split in order to correctly fill out the K-1 forms.

Thaanks.

Answer
Does not have to, but can equally attribute to the 3 owners, or if the owners don't have equal ownership, could attribute as per their ownership percentage, or not. . .

Do all the owners have the same potential to use the loss? or will some of that loss be "lost" because someone doesn't have an offsetting business income profit?

Richard

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Richard Fritzler

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Specializing in Business and Corporate taxation. Comparing the advantages and requirements of different business entities, such as Sub-S Corporations, LLC`s, Partnerships (Both Limited and General), Doing Business as a Sole Proprietor, or Using a C-Corporation. Issues regarding K-1 distributions, 1040, schedule C, 1120, 1120s. Are you considering domiciling a Corporation in a low tax state? I can review the benefits and misinformation that exists.

Experience

I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

Organizations
National Small Business Owners Association.
Publications
Contributing author to "The Corporate Standard Newsletter".


Publications
Contributing author to "The Corporate Standard Newsletter".
Ezinearticles.com articlesbase.com

Education/Credentials
I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

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