@accounts6 here are some follow-up comments:
- I assume that the copyright rights were not purchased by ABC LLC. If that is the case, the state merger of two SMLLCs will be a non event for federal income tax purposes since you owned both disregarded entities.
- Revenue 99-5 will come into play as a result of the new member acquiring a 20% interest in the combined SMLLC; which then becomes a multi-member LLC.
- It is at this point that you may have some ordinary income recognition as a result of selling 20%. This will depend on the assets held in the combined SMLLC.
- Make sure you touch base with your Secretary of State on the merger of the two SMLLCs.
- Additionally, you will need to register the new multi-member LLC, draft an operating agreement and articles of organization.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
