Thanks for your input.
Yes we filed partnership returns.
From your answer, I guess a capital investment and a loan are treated the same? from a tax standpoint there's not really a difference between a capital contribution and a loan in regards to an LLC.
HERE'S A LINK TO A PARTNERSHIP BASIS COMPUTATION WORKSHEET
https://tax.thomsonreuters.com/content/dam/ewp-m/documents/tax/en/pdf/other/quickfinder-updates/qpep...
Is it because we loaned the money to the LLC that we own? yes
Would it be different if we have lent to an LLC that we did not own? IN SUCH A SITUATION WHICH IS NOT THE CASE HERE THERE WOULD BE A SUBSTANTIAL DIFFERNCE IN THE TAX TREATMENT OF UNCOLLECTIBLE LOANS BECAUSE LOSSES OF THAT LLC WOULD NOT REDUCE YOUR BASIS IN THE LOANS SIMPLY BECAUSE YOU ARE NOT A PARTNER (OWNER) BUT A LENDER. THUS A NON-BUSINESS BAD DEBT
I am asking because We had an initial capital investment in the LLC that we used to purchase equipment. Then we needed extra funds so we made a loan to the LLC. Those extra funds went into infrastructure, operations and additional equipment. AS NOTED ABOVE THIS IS ONE LLC TO WHICH YOU ORIGINALLY MADE AN INVESTMENT AND THEN BECAUSE IT NEEDED MORE MONEY MADE A LOAN WHICH WAS REALLY AN ADDITIONAL INVESTMENT.
IN YOUR SITUATION THERE WOULD SEEM TO BE NO DIFFERENCE BETWEEN INSIDE AND OUTSIDE BASIS.
IN ANY CASE, SINCE IT SEEMS NO PROPERTY WAS CONTRIBUTED ONLY CASH IN THE FORM OF INVESTMENT AND LOANS, YOUR BASIS IS THE ORIGINAL AMOUNT INVESTED + ANY ADDITIONAL AMOUNT INVESTED + LOANS - DISTRIBUTIONS - LOAN REPAYMENTS - LOSSES.
IF WE WERE TO LOOK AT THE BALANCE SHEET ASSUMING ALL ASSETS WERE EXPENSED OR DISTRIBUTED (ASSET DISTRIBUTIONS OTHER THAN CASH CAN HAVE TAX ISSUES) WE WOULD LIKELY SEE PAGE 5 COLUMN D TOTAL ASSETS = $0 AND COLUMN D LINE 19A IN THE AMOUNT OF X
AND LINE 21 (X) -X SO THAT LINE 22 WOULD ALSO BE $0
