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LLC Business dissolving

Forum|Forum|5 years ago
February 19, 2021
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I am dissolving a LLC business and removing a vehicle for personal use. Where do I show this in business tax report.

TurboTax Business Windows

Best answer by Rick19744

This is not as simple as it may seem, however, you don't look to the FMV.

When liquidating an LLC taxed as a partnership and making liquidating distributions, you need to look to the adjusted basis of the property being distributed as well as your tax basis in the LLC.

There are specific steps involved when making liquidating distributions and because you distributed cash and property, you most likely have no gain or loss to report.

This is because once the cash is distributed and your tax basis is adjusted for that distribution, your property that was distributed now takes a basis equal to your remaining tax basis. Since you have two assets, the remaining tax basis will need to be allocated between those two items. I would use the original cost of each asset when determining the allocation.

M-MTax

Sounds like you'll be distributing cash and property to the members. Are there more than one or are you the only member?

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Irene2805

You didn't indicate whether your LLC is a single-member LLC filing a Schedule C or multi-member LLC organized as a partnership or S-Corp. Included are the instructions for handling the vehicle if you are filing a Schedule C. If this is not correct, please reply and let us know what type of business return you are filing.

Since you closed your business and kept the vehicle, the disposition of the vehicle is "removed for personal use."
As far as the IRS is concerned, your business is not closed, sold or disposed of until you have reported the disposition of all assets in the business, and that includes any and all vehicles used for business.

To indicate that you've removed the vehicle from business to personal use, please follow these steps:

Go into the business part of your return.
In the Business Expenses section, click the Edit box next to Business Vehicle Expense.
On the Vehicle Summary, click Edit next to the vehicle.
On the screen, Tell us about your business vehicle, mark the box I stopped using this vehicle in 2020, and enter the date you stopped using the vehicle in the business. [See Screenshot #1, below.]
When you come to the screen Do any of these apply to the [vehicle]? mark the box that you started using it as a personal vehicle 100% of the time at any point in 2020. [Screenshot #2.]
On the Sales Price screen, since you started using this vehicle for personal use 100% of the time, leave both the sales price and expense of sale fields blank. The gross sales price of a vehicle would be what someone paid you for it.
Continue through the rest of the screens.

Screenshot #1

Screenshot #2

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CCoffey456

Thank you for your reply. We prepare our business taxes as 1065 to issue a schedule K-1 for our 1040. So we don't use Schedule C. Could you send me the steps to keep our vehicle and trailer for personal use when dissolving our LLC for two partners? Thank you very much. Claudia Coffey

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Mike9241

if you are a single-member LLC you are considered as selling all of it assets (vehicle, machinery, etc,) that are converted to personal use at FMV. for a vehicle you can search the web - there's Kelly's Blue Book, Edmunds and a host of other sources.

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CCoffey456

Thank you Mike 9241 for your information. It's me and my husband so two-owner LLC. The question I have is where do I show the FMV of the vehicle on taxes. I'm working with Turbo Tax Business to issue 1065. Can you advise this? Thank you again. Claudia

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CCoffey456

Thank you for your replies everyone. This is a two-member LLC (my husband and I). Taxes are prepared on 1065 to then issue K-1 for our 1040. We are working in Turbo Tax Business (1065) and Turbo Tax Business and Personal (1040). It looks like I need to report the disposal of the truck and trailer from our business on the 1065, not the Form C on 1040, I just don't know where to report it. We are keeping both, not selling them, but will be using as personal vehicle. Look forward to your answers, and sorry I did not make this clear earlier.

Rick19744Answer

Employee

This is not as simple as it may seem, however, you don't look to the FMV.

When liquidating an LLC taxed as a partnership and making liquidating distributions, you need to look to the adjusted basis of the property being distributed as well as your tax basis in the LLC.

There are specific steps involved when making liquidating distributions and because you distributed cash and property, you most likely have no gain or loss to report.

This is because once the cash is distributed and your tax basis is adjusted for that distribution, your property that was distributed now takes a basis equal to your remaining tax basis. Since you have two assets, the remaining tax basis will need to be allocated between those two items. I would use the original cost of each asset when determining the allocation.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.