If one partner withdrawals from a two member LLC, should the current year return be marked final since the next year it will be a disregarded entity?

Forum|Forum|1 year ago
March 4, 2025
3 replies
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Turbo Tax says I have to dispose of my assets, but the business will continue as a single member LLC and the assets will still be used in the business

KrisD15

You filed as a Partnership for 2024 since the LLC had two (or more) members and you were setup as a Partnership.

For 2025, you can no longer be a Partnership with only one member, so you need to change the tax entity. You can setup an S-Corp or file as a Sole-Proprietorship.

If you choose to file as a Sole-Proprietorship, you will file Schedule C as part of your personal federal return.

You will probably need to dissolve the LLC with the state and transfer the assets to your new business. How that works is regulated by the state.

HERE is a link from the IRS but you will want to get local legal advice as well.

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AmeliesUncle

Yes, it is marked as final.

Yes, the final Partnership return must dispose of its assets. In your case, it would be distributing them to you.

msardocpaAuthor

So if I dispose of the assets, does the partnership recognize a gain or loss and have to file 4797? Turbo tax took bonus depreciation on the assets. If I use the assets in the business that is now a single member LLC do I start the depreciation over, and if so, what is the depreciable basis?

AmeliesUncle

No, there is no gain or loss when a Partnership distributes property to a Partner.

I am pretty sure you just "step in the shoes" of the existing depreciation, using the original placed in service date and the original Basis. I KNOW that is how it works when it is the other way around (a sole proprietor contributes property to a Partnership), and I THINK it works both ways.

Mike9241

you report the distribution of property because the ending balance sheet should be all zeros. for your 1040 return because you got property, you'll need to complete from 7217 that Turbotax does not support. (nor does Turbotax even bring up the issue)

https://www.irs.gov/forms-pubs/about-form-7217