LLC's taxed as a partnership are complicated, especially when member's come in or leave.
There are several issues here that need to be addressed:
- Hopefully you have been maintaining your basis in the LLC. This is critical, as without it, you will not be able to compute your overall gain or loss.
- Based on your limited facts, it appears that the LLC went from a two person multi-member LLC taxed as a partnership, to a single member LLC which will now be taxed as a sole proprietorship by the remaining member.
- If bullet two is correct, the LLC will need to file a final return for the period ended in August 2019 when you left the LLC. If this has not occurred, the LLC return is late and the penalties are $205 per month per partner / member.
- Once the LLC has filed the final tax return, you should receive a K-1 that indicates final as well. You will need in input the information from the K-1 into your personal tax return just as you have done in the past. You will need to indicate in TT that this if a final K-1. TT will then ask information related to the termination and compute your overall gain or loss; this is why bullet 1 is important.
- There are several factors in which some of your gain (if you have a gain) may be taxed as ordinary income instead of capital gain.
- As you can see, there are a number of issues here in which consulting with a tax professional could be helpful.
*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.
