Solved: We LLC as P sold asset and dissolving upper tiers as of 12/31/16 but JV is not until 2017. The K-1s due 15th of 3rd mo but can we extend if JV doesn't send K-1 then?
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New Member

We LLC as P sold asset and dissolving upper tiers as of 12/31/16 but JV is not until 2017. The K-1s due 15th of 3rd mo but can we extend if JV doesn't send K-1 then?

I need to know the process of dissolution of LLC (when to dissolve) and any problems or items to consider. We do not want to file 2017 return and want the 2016 to be final. Also, we are accruing all remaining expenses as of 12/31/16 and recording distributions as of 12/31/16 but we will move cash beginning 2017.

JV is Joint Venture. Sorry, there was not enough space to write a more precise question. We sold an asset back in August and there is no activity nor business operations at JV level. The lender was paid, distributions were made so there are only few expenses left such as tax return preparation, registered agent fees, DE franchise taxes and one last distribution left for the remainder of cash in the account. All expenses and distributions are already recorded but cash will move in 2017. Upper tier entities are dissolving 2016 but JV is controlled by our partners and they will dissolve in 2017. So I wanted to know if this affects upper tier entities because they need to await for the K-1 from JV to file own K-1s.
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Level 10

We LLC as P sold asset and dissolving upper tiers as of 12/31/16 but JV is not until 2017. The K-1s due 15th of 3rd mo but can we extend if JV doesn't send K-1 then?

As noted above, you should consider discussing this with a tax professional.  Tax law is complicated and partnership tax in particular is clearly at the top of complicated areas of the tax code.

There are a number of items to consider here:

  • The partnership (LLC) cannot technically file a final return until the final distributions are made.  While you might be able to accrue the distributions for book purposes, you cannot accrue distributions for tax purposes.  
  • You are in a winding down of the business and technically the partnership does not terminate until the winding down events are complete. 
  • Based on the above two items, your 2016 tax return should not be a final tax return.
  • Things can change, expense estimates can vary which will impact any final cash distribution. Until the member's receive their final distribution they are not able to determine their respective gain or loss on their investment.  This will occur in 2017.
  • While it is too complicated to discuss in a forum such as this, liabilities of the partnership need to be considered.  Did any member use debt basis to take any prior losses?  If so, this adds a level of difficulty and possibly recognition of income (at-risk recapture).
  • Filing your 2017 return should not be that big of a deal if everything else goes according to plan.  Once all the final expenses are paid in 2017, which technically accounted for in 2016, the only thing left to do is make the cash distribution, reflect this on the K-1 and mark the return and all K-1's as final.

*A reminder that posts in a forum such as this do not constitute tax advice.*

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7 Replies
Level 9

We LLC as P sold asset and dissolving upper tiers as of 12/31/16 but JV is not until 2017. The K-1s due 15th of 3rd mo but can we extend if JV doesn't send K-1 then?

What is "JV"?  Joint Venture?

Are you saying the LLC/Partnership receives a K-1 from the "JV"?  
Are you saying the "JV" doesn't end until 2017?

You can't file a "Final" return until pretty much everything is done.
Level 15

We LLC as P sold asset and dissolving upper tiers as of 12/31/16 but JV is not until 2017. The K-1s due 15th of 3rd mo but can we extend if JV doesn't send K-1 then?

I STRONGLY URGE you to seek out qualified assistance with this situation since doing it wrong can cost you plenty down the road. This is not something you should "do yourself" unless you are well versed in the subject matter.
Level 9

We LLC as P sold asset and dissolving upper tiers as of 12/31/16 but JV is not until 2017. The K-1s due 15th of 3rd mo but can we extend if JV doesn't send K-1 then?

I agree, depending on the circumstances, liquidating a Partnership can potentially be very complicated, and TurboTax is not set up to guide you through the more complicated stuff.
New Member

We LLC as P sold asset and dissolving upper tiers as of 12/31/16 but JV is not until 2017. The K-1s due 15th of 3rd mo but can we extend if JV doesn't send K-1 then?

JV is Joint Venture. Sorry, there was not enough space to write a more precise question. We sold an asset back in August and there is no activity nor business operations at JV level. The lender was paid, distributions were made so there are only few expenses left such as tax return preparation, registered agent fees, DE franchise taxes and one last distribution left for the remainder of cash in the account. All expenses and distributions are already recorded but cash will move in 2017. Upper tier entities are dissolving 2016 but JV is controlled by our partners and they will dissolve in 2017. So I wanted to know if this affects upper tier entities because they need to await for the K-1 from JV to file own K-1s.
Level 9

We LLC as P sold asset and dissolving upper tiers as of 12/31/16 but JV is not until 2017. The K-1s due 15th of 3rd mo but can we extend if JV doesn't send K-1 then?

If your entity will be receiving a K-1 for 2017, it can not file a Final return until 2017.
New Member

We LLC as P sold asset and dissolving upper tiers as of 12/31/16 but JV is not until 2017. The K-1s due 15th of 3rd mo but can we extend if JV doesn't send K-1 then?

It will receive a K-1 in 2017 for 2016...So it plans to file a final return in 2017 (as it is due in 2017) for the 2016.
Level 10

We LLC as P sold asset and dissolving upper tiers as of 12/31/16 but JV is not until 2017. The K-1s due 15th of 3rd mo but can we extend if JV doesn't send K-1 then?

As noted above, you should consider discussing this with a tax professional.  Tax law is complicated and partnership tax in particular is clearly at the top of complicated areas of the tax code.

There are a number of items to consider here:

  • The partnership (LLC) cannot technically file a final return until the final distributions are made.  While you might be able to accrue the distributions for book purposes, you cannot accrue distributions for tax purposes.  
  • You are in a winding down of the business and technically the partnership does not terminate until the winding down events are complete. 
  • Based on the above two items, your 2016 tax return should not be a final tax return.
  • Things can change, expense estimates can vary which will impact any final cash distribution. Until the member's receive their final distribution they are not able to determine their respective gain or loss on their investment.  This will occur in 2017.
  • While it is too complicated to discuss in a forum such as this, liabilities of the partnership need to be considered.  Did any member use debt basis to take any prior losses?  If so, this adds a level of difficulty and possibly recognition of income (at-risk recapture).
  • Filing your 2017 return should not be that big of a deal if everything else goes according to plan.  Once all the final expenses are paid in 2017, which technically accounted for in 2016, the only thing left to do is make the cash distribution, reflect this on the K-1 and mark the return and all K-1's as final.

*A reminder that posts in a forum such as this do not constitute tax advice.*

View solution in original post

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