My husband and I owned an LLC that held rental properties. We dissolved the LLC this year after first having sold all the properties. Section 1231 gain on the sales is approx $600,000. Section 1250 gain is approx $160,000. I understand that the latter is taxed as income tax and that CGT applies to the remainder ($440,000).
As a final step in the winding-up process, we received approx $1,000,000 in cash. If I've calculated our basis in the LLC correctly, this amounts to approx $580,000. When I enter our K-1s into TT, will we pay CGT on both the $440,000 mentioned above, PLUS the $420,000 distribution ($1,000,000 distribution minus $580,000 basis)? This feels like double taxation, and I'm hoping this will not be the case!
Thank you.
