Comments as follows:
- While I know you can liquidate a partnership for federal income tax purposes and it still exists for state legal purposes, I have never seen this occur. You may want to discuss with an attorney.
- Your facts and response are conflicting because you indicate that you had "a sale or exchange of business assets that were converted to personal use" and then you indicate that "would allow the LLC to report the eventual sale of the assets they continue to own". These statements are mutually exclusive. See next bullet.
- What I believe needs to occur, or what happened, is that you distributed out the assets to the members. Distributions of property from an LLC taxed as a partnership to the member's can be fairly complicated. The handling of this will vary depending on whether or not this will be treated as a normal distribution or a liquidating distributions.
- While the tax impact of bullet 3 could vary, regardless, you will need to know your basis in the LLC. This will become critical as this will provide a ceiling for your "substituted" basis in the assets distributed.
- Distributions of property to a member in an LLC is generally tax free and that is where the substituted basis concept comes into play. In addition, the member receiving the distributed property steps into the shoes of any future depreciation recapture when the property is sold at a later date.
- So personally, if the property was distributed in 2017, then I think you should have a final return in 2017 and the distributions would be liquidating distributions along with anything else that may have been distributed; ie: cash, etc. However, as noted previously, you should check with legal as to any legal liability issues that you want to understand prior to making that decision.
*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.
