How to deduct expenses related to LLC that closed last year?

Forum|Forum|6 years ago
June 1, 2019
3 replies
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We were partners in an LLC that closed last year. This year we paid a settlement to the landlord for breaking the lease (we had signed a personal guarantee for the lease). There were legal fees related to this settlement. Also, we paid our partner's share of the settlement and he is repaying us monthly with a personal loan.

How do we deduct the settlement amount and associated legal fees and how do we report the principal and interest repaid to us by the other partner?

TurboTax Premier Windows

Best answer by Rick19744

You will treat your share of the settlement and legal fees "as if" you had made a capital contribution to the LLC. Since you already determined your final gain or loss last year, when you received your final K-1", these expenses essentially become capital losses; short term.

For the portion that you paid related to your partner, you have made a loan to them. The interest is reported just as any other interest and there is no tax implications related to the principal repayment.

Make sure you have a written loan agreement with a stated interest rate to protect yourself.

Carl11_2

Employee

I myself can't help. But you need to specify what form you filed for this LLC last year. It "sounds" like a partnership, indicating that you filed a 1065 for the business.