Limited partner in LLC that converted to C Corp in 2016. Have K1 for part of year. Is the conversion taxable?

[mattdobbinsscuba]

1st Q 2016 conversion from LLC to INC.  Is the conversion taxable?  How do I report it in TT?

[RichardK]

This is probably a situation where you would be wise to seek guidance from a professional knowledge about mergers, who could probably structure this conversion so that it would not be a taxable.

Obviously, you report the Form 1065, Schedule K-1 information (from the beginning of the year until the conversion) on you individual tax return. As far as the conversion, there are several ways is can be accomplished

Three types of conversion, and each has its own specific issues are:

1. Statutory conversion 

2. Statutory merger 

3. Non-statutory conversion 

The IRS in Revenue Ruling 84-111, briefly describes three more specific methods of converting an LLC to a corporation when using a non-statutory conversion:

·        Direct transfer of all of the assets of the LLC to the corporation, in exchange for all the stock of the corporation (this could be a nontaxable conversion)

·        Transfer of the assets to the partners, then the partners transfer the assets to the corporation (if handles properly, this could be a tax free conversion)

·        The partners transfer their interest in the partnership for stock of the corporation (this could be a nontaxable conversion)