Passive K-1 Transfer to Living Trust

Forum|Forum|2 years ago
April 2, 2024
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I have several passive investments in LLCs that issue K-1s to me each year. In 2023, I transferred the ownership of these LLCs from me as an individual to my Living Trust (same SSN). The partnership has issued two K-1s for each LLC, one that is a "Final K-1" under my name and then a second K-1 that is under the Living Trust (effectively, the first K-1 as if it's a new investment).

The sum of these two K-1s (per LLC) covers the full profit (loss), capital gain (loss), etc for each partnership, so I know I must enter both K-1s. My question -- In this case, the LLC remains under the same SSN but a different legal entity, so is it still treated as a sale of the LLC? TT seems to require me to treat it as a sale even though nothing was exchanged in the disposition for the "Final K-1." Any advice is appreciated!

Best answer by PatriciaV

Because the taxpayer identification number on the Schedules K-1 is the same, you don't need to enter both. Simply add the amounts together for each box and enter the total for each K-1 investment. The IRS receives only Schedule E page 2 with the partnership name. As long as your calculations are accurate, you should be fine.

PatriciaVAnswer

Employee

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rv2

@PatriciaV

What about the capital account values In box L?

First K1 zeroes out fields in the ending and also shows a loss in box N (704 c),

Whereas the second K1 adds the ending of K1-L to the second K1-L-other increase, and ends with a different Box N loss

So, should i add these box L and N values up as well?
thx

PatriciaV

Employee

Use the beginning balance of the first K-1, add together each of the other lines from Section L, and the ending balance should match the second K-1.

Note that the capital analysis section (L) is not included on your personal tax return when filed. Only the income/expense items are reported on Schedule E. The capital balance section is for your information only.

@rv2

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