Claiming additional Taxes paid by LLC memebers as expense in pass through LLC tax return

ateky — Sat, 01 Jun 2019 17:52:41 GMT

I have a two memebers llc that is a pass through entity for a few years now (equal ownership for both members). Both members have "regular" jobs elsewhere with W-2 incomes. The LLC generated about $20,000 income in 2017, which passed to the two members ($10000 each in their respective K-1).

As a result of this $10000 "extra" income from the LLC, each member paid "an additional" $2500 tax in 2018 when filing the 2017 personal income tax. I say "additional $2500 tax each" because that's the additional tax the members paid in addition to their taxes incurred from their regular W-2 incomes. The LLC then reimbursed each memebr $2500 in 2018 for the "additional" taxes each memeber paid.

My question is, can the LLC claim the $5000 ($2500 x 2) paid to the two members as expense incurred in 2018 when filing the 2018 tax return? If Yes, what kind of expense is this? If no, why?

Thanks for the help.

No. The $5,000 is not an expense. It is treated as a di...

Rick19744 — Sat, 01 Jun 2019 17:52:42 GMT

No. The $5,000 is not an expense. It is treated as a distribution to the member's.

You need to make sure each member maintains a basis schedule as this determines if losses are deductible, if distributions are taxable and then eventually, whether there is a gain or loss on the investment.

topic Claiming additional Taxes paid by LLC memebers as expense in pass through LLC tax return in Business & farm

Claiming additional Taxes paid by LLC memebers as expense in pass through LLC tax return

No. The $5,000 is not an expense. It is treated as a di...