Our multi-member LLC treated as a partnership was dissolved this year (2022). The LLC bought equipment (depreciable assets) in 2021 that was fully depreciated per section 179. I am trying to find out options for how to report the assets on the final federal return (in the balance sheet and on relevant forms) and whether one of the former LLC members continuing to use the assets avoids a section 179 recapture.
Specifically, I'd appreciate any input/guidance on:
- Whether the closing of the business:
- Requires that ending assets (like inventory) be 0 (compared to keeping the assets on the balance sheet and continuing to use them/sell them after dissolution as part of winding down) and
- Triggers the need to consider a section 179 recapture (does dissolution convert the assets to personal use and does a member using those assets for the same type of business/trade as a sole proprietor change that determination?).
- If closing equates to essentially a conversion of the assets from business to personal use:
- What is put in TurboTax for the % of business use if use was entirely for the business until the LLC was dissolved?
- This requires filing Form 4797, correct?
- Does the conversion still happen if the assets are used by an LLC member as a sole proprietor to continue the same type of business (specifically, pursuant to 26 CFR § 1.47–3(f), which covers a mere change in form of conducting a business? If not, is there anything else the SP needs to show?
- In either case (conversion to personal use triggering section 179 recapture OR continuation), how are the assets covered in the balance sheet? Specifically, are ending assets and depreciation zero (with Form 4797 submitted), or do they keep their value and depreciation, and in what case is each applied?
Thank you!
