Helpful for me to provide some guidance, but partnership tax is complicated:
- Unfortunately, regardless of the size of the partnership, the tax issues get complicated very quickly. As such, you may want to consult with a tax professional.
- You don't mention when the business terminated. If before 12/31, the partnership return is due the 15th day of the 3rd month following the termination. So hopefully this is not an issue for you.
- Liquidating distributions should be based on each member's interest in the LLC. If not, this will cause disproportionate distribution issues. I bring this up as you state you received some expensive camera equipment. What did the other member receive?
- You need to report the liquidating distribution(s) on line 19 of the K-1 with the appropriate code.
- When property is distributed to a member in a liquidating distribution, the property takes a "substituted basis". There are specific rules on how this is determined. You also step into being responsible for depreciation recapture (ordinary income) when eventually sold.
- If any cash was distributed, that would reduce your tax basis first before determining your "substituted basis".
- Liabilities and any other potential "hot assets" need to be reviewed for potential tax impact
- Hopefully you have maintained your outside tax basis, as without this, you will not be able to determine the impact of anything discussed above.
- Remember to contact your Secretary of State. If not "closed" properly California will continue to require the $800 franchise fee.
- I will phone a friend on the disposal within TT Business since I am not on a Windows platform. I assume you should choose "disposed of by some other means"? @Anonymous_ any thought here?
*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.
