LLC stock distributions at termination

Forum|Forum|1 year ago
November 17, 2024
2 replies
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My wife and I are 50/50 members of an LLC that holds only a brokerage account. We pay taxes yearly on the dividends, interest and capital gains via a K--1.

We will probably terminate it this year, and want to move the stocks and bonds out into our regular joint account. We would not be selling anything.

Is this type of a distribution tax free?

The only thing happening is changing the ownership from our LLC to our joint account? The current basis would remain unchanged.

Where does this appear on the 1065 and K-1?

Not A Product Question

Anonymous_

Employee

No text available

fcp3Author

Thanks

Yes I know of need for final 1065, but if we transfer stock with capital gain, do we have to pay capital gains tax, if we do not sell the stock.

From what I can find, stock is considered "money" but "investment partnerships" are exempt from the requirement that the "gain shall not be recognized to such partner, except to the extent that any money exceeds the adjusted basis of partner's interest immediately before the distribution"

Is the "Adjusted basis" here the cost basis of stock we bought decades ago or is it the value of the stock before distribution

OR since we are not selling stock there is no gain and no tax

BTW Anyone who can force TT Business in producing an accurate tax form with these issues is a genius. I certainly can't but will have to find a new CPA as my previous one passed away.

I am trying to figure this out so I can move stuff before the end of the year

Anonymous_

Employee

No text available

Mike9241

the simple answer is that the distribution is shown as such on the 1065 and line 19A of the k-1 (assuming the forms do not change in 2024). note that the actual due date of the 1065 is the 15 day of the 3rd month following the month when the assets are distributed.

so technically if you terminate in November the return is due 2/15/2025

fcp3Author

@Anonymous_ @Mike9241 @Rick19744

Thank you all so very much. I found a lot of the links myself, but had to actually read the Code to find the Investment Partnership exemption.

I had not found the deadline either

Will try to find another CPA to help

fcp3Author

I have reached the CPA who took over for my previous CPA. He confirmed all of what you have said.

We can move the assets out of the LLC without tax consequences and if we terminate the LLC in December the filing deadline is the 15th of the month three months later, so still 3/15/2025