How do I record the conversion of a loan to LLC equity in the 1065 forms?

tim3 — Sat, 01 Jun 2019 00:29:45 GMT

I have a 2 member LLC (50/50) that I made 2 loans to (with interest) - one in 2014 and another in 2015. I converted both loans to member equity in 2015 when the other member added an amount of owner's equity to equal the principle and interest. How do I record the conversion in the 1065 forms? Thanks!

Tim

This is all balance sheet. It appears that the interest...

Rick19744 — Sat, 01 Jun 2019 00:29:47 GMT

This is all balance sheet. It appears that the interest was never paid and just accumulated; in a case like this the IRS may want to take a position that this was equity from the beginning so converting makes sense.

Additionally, it appears that the other member contributing more $$ as well, the economics stay the same; which is good.

On your balance sheet you would just make the following entry; Dr. Member Loan Cr. Member Equity. Essentially you are just reclassing the loan to equity.

topic How do I record the conversion of a loan to LLC equity in the 1065 forms? in Business & farm

How do I record the conversion of a loan to LLC equity in the 1065 forms?

This is all balance sheet. It appears that the interest...