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New Member
posted Jun 4, 2019 12:08:45 PM

An LLC is in Chapter 7 fully liquidated and filing final return. Is the COD income excluded due to bankruptcy? Where do you show the COD income in Turbo Tax?

the LLC historically filed form 1065 for tax purposes.   The COD was generated because the creditors were not paid off in full.  Can you use the bankruptcy exception for partnerships?  If not, how do you enter into Turbo tax?

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1 Best answer
Level 13
Jun 4, 2019 12:08:48 PM

A few comments here:

  1. Make sure that you file a final form 1065 and that all K-1's are marked final as well for the last year.
  2. The COD income will be reported on Sch K and K-1.  This should show up on the K-1 line 11 code E as a separately stated item.
  3. Whether or not this income is taxable is determined at the member level NOT at the LLC level.  So if the member is not insolvent, then the COD will be recognized on the member's 1040.
  4. I would imagine that typically most LLC's in this situation the member may have some suspended losses due to either basis or at-risk limitations.  These will be freed up in the final year and will be able to offset any COD income.

Depending on the significance of the COD, you may want to consult with a tax professional when preparing your personal 1040.

3 Replies
Level 13
Jun 4, 2019 12:08:48 PM

A few comments here:

  1. Make sure that you file a final form 1065 and that all K-1's are marked final as well for the last year.
  2. The COD income will be reported on Sch K and K-1.  This should show up on the K-1 line 11 code E as a separately stated item.
  3. Whether or not this income is taxable is determined at the member level NOT at the LLC level.  So if the member is not insolvent, then the COD will be recognized on the member's 1040.
  4. I would imagine that typically most LLC's in this situation the member may have some suspended losses due to either basis or at-risk limitations.  These will be freed up in the final year and will be able to offset any COD income.

Depending on the significance of the COD, you may want to consult with a tax professional when preparing your personal 1040.

New Member
Jun 4, 2019 12:08:49 PM

Thank you.  That was helpful.  

Level 13
Jun 4, 2019 12:08:51 PM

Welcome.