Partnership tax gets complicated very quickly; about as fast as the acceleration of a Tesla. There are many questions that are not addressed, and unfortunately, a forum such as this is not conducive in these types of situations.
- While you may not want to use a tax professional to handle your taxes, I am going to strongly suggest that you reconsider. Your 2021 tax return is late, there could be penalties, interest, late filing, etc. Don't be penny wise and pound foolish here. Find a professional you are comfortable with, and have them handle this making sure that 2022 is correct when it is amended for the sale impact.
- You don't indicate whether the whole purchase price was received in 2022. This impacts whether the sale is an installment sale.
- As a partner in an LLC taxed as a partnership, you should be maintaining your tax basis. This figure is key in determining your overall gain or loss on the sale. The capital account figure on the K-1 may be close, but I would not generally rely on this figure to equal your outside tax basis.
- You could have Section 751 recharacterization (hot assets) depending on the assets held by the LLC. This will impact the character of the gain; it won't change the overall gain or loss, just a reallocation of capital vs ordinary.
- You should ask the individual preparing the LLC tax return if you will receive a final K-1 in 2022 or why the 2021 K-1 was not marked as final. You need to make sure that you have all the facts when preparing your personal tax return(s). The preparer of the LLC return may be treating this as a redemption, and as such, the final K-1 will be indicated in the year the final sales price (installment payment) is paid.
- Not pretty, but that is the partnership tax world.
*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.
