Partnership tax gets complicated very quickly......and you are now experiencing the complications:
- It appears that you have filed a final return for the multi-member LLC
- I will use A for you and B for the other LLC member
- When A purchased B's interest the LLC liquidates all property to both members.
- It is then deemed that A purchased the property from B.
- You need to review Revenue Ruling 99-6 situation 1 as this applies to your facts.
- It's doubtful that you have any gain or loss of this transaction once you following the application of the revenue ruling and IRC Section 732.
- What happens is that your purchase price gets allocated to the items that were distributed to B and that you purchased.
- You should have also completed form 8594
- You will have a bifurcated basis in the assets; basis in the assets that were distributed to you, and then a separate basis in the assets you purchased from B. Additional complexity will exist when you each owned 50% of single assets and you end up with 100% of those assets.
- This is not for the faint of heart and determining the correct basis for both sets of assets will be difficult.
- I would recommend extending your personal return and get professional help.
*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.
