LLC - cash reserve taxed 2x

Forum|Forum|6 years ago
February 3, 2020
2 replies
22 views

How do we prevent our reserve from being taxed twice? We left $10k in the bank year end and our K1's now include $5k for each member as ordinary income since the 10 K was not listed as an expense. We will also be taxed when we distribute that 10k this year.

DianeC958

Level 12

The reserve will not be taxed twice.

The amount you are taxed on depends on the amount of income reported on your K-1, not the amount of the distributions.

The income you are taxed on is reported in Boxes 1-11 of the form K-1 1065

Link to Form K-1 1065

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ProfitPartnersTaxAuthor

Level 2

Thank You Diane. That's what I thought but Turbo Tax if auto filling Line 1 - ordinary income to include the reserve as we enter in the percentage each member gets for Profit.
That number is Gross Receipts minus Expenses = Ordinary income (the reserve is in here)