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Tax Law (Questions About Taxes)/Inequitable distributions from an LLC

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Question
I was a 50/50 member in an LLC.  The other member took higher distributions from the LLC than I did.  He has since voluntarily assigned his membership interest to a substitute member.  Can the excess the original member took in distributions be deducted by me as a bad debt expense?

Answer
Bad debt is something entirely different. Bad debt is a write-off of an uncollectable loan. Distributions is not a loan.

I commiserate with you, that you trusted without knowing the facts. You got snookered, are you going to let that happen this year?

50/50 is never as good as it sounds. Giving the decision making power to someone else can be devastating. LLC's tend not to be as good as everyone thinks; You happen to experience one of the OTHER reasons that LLC's aren't good.  

Tax Law (Questions About Taxes)

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Richard Fritzler

Expertise

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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