Multimember LLC to Single Member LLC

[fergs]

1/1/2024 I purchased the 50% interest of a rental real estate LLC taxed as a partnership from my partner.  I am now the sole 100% owner.  The rental real estate owned by the LLC was originally purchased in 2003.  A final 1065 return was filed appropriately. There was no activity reported on the final K-1's.    I would have a capital gain of $1584.00 (difference in distribution and tax basis) resulting from distribution of cash held by LLC.  Would this be long term or short term?  Additional question, how do I enter this through turbo tax.  I'm not seeing where specifically this situation would be addressed in the Turbo Tax prompts.

[PatriciaV]

Was the real estate property distributed to you when the partnership dissolved? What was the Fair Market Value of that real estate on that date? You will need to know this before you can calculate your final basis in the partnership and determine if it was a gain or loss.

Was the LLC created at the same time the real estate was purchased? If so, then the dissolution transaction would result in a long-term gain or loss.

When you enter the final K-1, report that the partnership closed in a final liquidation. TurboTax will walk you through reporting your final basis and determining if you have a gain or loss.

However, this is a complex situation. You may wish to consult a local tax professional regarding your ending basis in the partnership and your new basis in the real estate property.

[Rick19744]

Partnership tax gets complicated very quickly......and you are now experiencing the complications:

• It appears that you have filed a final return for the multi-member LLC
• I will use A for you and B for the other LLC member
• When A purchased B's interest the LLC liquidates all property to both members.
• It is then deemed that A purchased the property from B.
• You need to review Revenue Ruling 99-6 situation 1 as this applies to your facts.
• It's doubtful that you have any gain or loss of this transaction once you following the application of the revenue ruling and IRC Section 732.
• What happens is that your purchase price gets allocated to the items that were distributed to B and that you purchased.
• You should have also completed form 8594
• You will have a bifurcated basis in the assets; basis in the assets that were distributed to you, and then a separate basis in the assets you purchased from B.  Additional complexity will exist when you each owned 50% of single assets and you end up with 100% of those assets.
• This is not for the faint of heart and determining the correct basis for both sets of assets will be difficult.
• I would recommend extending your personal return and get professional help.