In 2005 I initially committed to an LLC investment of $15,000 via my friend, Bob. Bob is the one who brought me into the deal, so he communicated with the partners that I was interested and they allocated $15k for me plus whatever amount Bob wanted. Due to a change in my circumstances, I had to back out of the deal, but Bob had already committed to the LLC his investment amount and my $15,000. He agreed to cover my $15k, and invested that amount in addition to the amount he had originally intended to invest.
Over the next ten years things didn't go well for the LLC, and Bob lost most of his investment (along with the $15k he put in for me.
In 2015 the LLC opened up another round of investment with more favorable financial terms, and I again expressed my interest - this time investing $20,000 directly with the LLC. Bob also stayed in, adding new capital, and we agreed that if this new round went well, he would get the first $15k to come out of whatever gains I realized. He memorialized this agreement in an email to me, and I replied that I agreed to do this.
This time around the investment worked out well, and in 2020 the LLC had a liquidity event, paying out all investors in a combination of qualified dividends and long term capital gains. My share of gains is worth approximately $30,000, which is reflected on the K-1 I received for 2020. This form also shows in Box L my basis as $18,500, Withdrawals and Distributions of $48,500 (=18k + 30k) and my Ending Capital Account as $0.
In December of 2020 I received my distribution statement from the LLC, and was given the option to either receive a cash payment for the entire distribution amount, or roll some or all of it back into the LLC as common or preferred stock. (I'm not sure it matters, but I decided add another $20k to my investment and roll all of it into preferred stock, raising my total investment to $68,500, not including the $15,000 that Bob put in for me back in 2005).
In fulfillment of the agreement I had with Bob, I wrote him a check for $15,000 in December of 2020, thereby honoring our agreement, and effectively increasing my basis in the 2015 round from $20,000 to $35,000.
I have been playing around with different ways to reflect this in TT, but so far have not figured out how to enter the numbers so that the changed basis reduces the tax due. Any suggestions on how much to enter and in which fields? Thanks for any tips.
