Hello,
I am looking for guidance on how to properly handle a 2 member LLC taxed as a partnership to a 1 member LLC taxed as a disregarded entity. The entity owns a single piece of real estate for a total of 3 tax years.
My understanding is file a final 1065 and mark final K1s for members with an effective end date of 12/31/24. For 2025 the remaining LLC member will file the return on Schedule E (real estate) with same EIN, same LLC creation date, same depreciation schedule, etc. All Articles have been updated.
One partner (15%) received cash distribution equal to the amount of his outside basis. The other parter (85%) is receiving the property (house) also equal to the amount of his outside basis. I have properly marked distributions and they reflect on K1 lines 19a/c. The balance sheet (Sch L) has zero assets. Capital accounts (M2) is also now zero. Per my understanding the final 1065 needs to have no assets or capital.
The assets in TTBusiness were marked as sold for the exact same price as their adjusted basis to reflect a $0 gain/loss as there truly was no sale of assets. I didn’t see another option if they were not in fact sold. The member keeping the property would then step-in-the shoes and continue depreciation on his Sch E. Is there a better way to handle this part? When I enter the K1 on the personal side I do see the option for “Disposition was not via a sale”. I entered all info and there is no taxable event but I do need to report that the property was distributed via Form 7217. Is this the correct way to go about this? I appreciate any clarity on this as this isn’t exactly a situation where there is a sale, but truly return of capital.
