PatriciaV
Expert Alumni

Business & farm

RobertB4444 is correct. If you sold your interest in the LLC to a third party (or another partner), that transaction occurred outside the LLC. In other words, you report the sale on your personal return.

 

However, the transaction you described was not a sale. Two partners made capital contributions that increased their basis in the LLC. You received a disproportionate distribution equal to their contributions that may have violated your operating agreement. It appears the basis adjustment was used to bring your capital balance to zero - was this allocated income/loss?

 

The correct way for this buyout to occur was for the other partners to pay you directly. Your capital balance would be adjusted to zero, allocating half to each of the purchasers. No gain or loss would be reported by the LLC.

 

I highly recommend you contact a local professional to review this transaction in light of your operating agreement and IRS rules, and advise you on correcting and/or reporting the change in ownership.

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