LLC taxed as a partnership. An owner left in Feb 2024

[amyonghwee]

We have a LLC taxed as a partnership, started in 2023. There are 3 partners and each received a 2023 Schedule K-1. In Feb 2024, a partner left.

When started 2024 TT business, I clicked on the selection that there is an ownership change. But nowhere did TT ask which owner las left.  The schedule B-2 still lists 3 owners. 

Pls advise on how to proceed.

[PatriciaV · Accepted solution]

Here are the steps to report this ownership change in TurboTax Business:

Open your return in TurboTax Business.

1. Go to Business Info >> About Your business and check the box for "Has an Ownership Change."
2. Continue through the interview to the Member Summary page.
3. Click Edit next to the name of the leaving partner.
4. Check the box for "This member left the company this year."
5. Continue through the interview until you can enter the date the partner left.
6. Adjust "After" percentages to allocate the difference to the remaining partners (must total 100%).
7. Now go to Forms Mode (Forms icon in header) and open Sch K-1 Wks.
8. Review the ending percentages for each partner at the top of the right-hand column.
9. Use the gray scroll bar to move through the partners.
10. The totals at the bottom must be 100% for beginning and end of year.
11. Now open Addl K-1 Info worksheet.
12. Scroll through the partners and check that the leaving partner has no entries under Loss and Ownership (can also be zero if box/font isn't red).
13. Again, the Totals at the bottom must be 100 for each period (before and after the partner left).
14. Also, confirm that neither form has a red exclamation mark in the forms list on the left.
15. Use Step-by-Step to return to the main screens.

Schedule B-2 will show all partners who will receive Schedule K-1. This includes the leaving partner, who will receive a final K-1.

[amyonghwee]

Thanks @PatriciaV for the detailed sequences which greatly helps!

I see the weights allocated based on the time the partner left.

From 1st Jan to the time the partner left (Feb), mainly loss is incurred.

Then from Mar to Dec, mainly gains.

Can I break down the transactions as follows 

Jan-Feb : Loss   

Mar-Dec : Gain

so that the partner during the time he is in company, he incurs only losses ??

[PatriciaV · Accepted solution]

Yes, you can allocate specific income/loss to each partner. To do this, you'll need two income statements - one for the period with all partners and another for the period after the partner left. The combined totals should match your actual year-end income statement.

You will need to manually calculate and specifically allocate Schedule K-1 lines items for each period to reflect the actual activity that should be reported to each partner. 

First, be sure to activate Special Allocations in step-by-step under Business Info tab >> About Your Business >> Makes special allocations. 

To learn more about Special Allocations: 

1. Go to Partner/Member Information and click Done at the bottom of the Member Summary page.
2. Continue to the page "How to Enter Special Allocations" and click "See Demo" at the bottom.
3. Follow the example for Special Allocation by Amount.

Special Allocations -- By Amount

Use this section to allocate items reported on Schedule K using an amount rather than by year-end profit, loss, or ownership percentages or other ratio. Enter special allocation amounts in fields A-D. Use the format XXXXX to represent an amount (for example, enter 10,000 for $10,000).

You will need a code for each item of income/expense that appears on Schedule K-1 for each period. If you have only ordinary income to allocate, use two codes - one for the period with the loss and another for the period with a gain.

Example: To specially allocate Ordinary Income on Schedule K by dollar amount, perform the following steps:

 (1) In the Sch K-1 Wks - Special Allocations columns, enter an amount in field A to designate the allocation to each partner. Check that the total on the bottom of the page equals your total allocation amount for each code.
 (2) On Schedule K, line 1 enter an A (to refer to the special allocation field number) in the SA field to the left of the amount line. Repeat for each Schedule K-1.

 (3) Note: After entering codes for all partners who will receive a special allocation, refer to the Totals for All Schedules K-1, Total special allocations and verify that the total amounts for each line used (A through D) totals the amount entered on Schedule K.
 

The overall allocation summary appears on the Sch K Reconcile worksheet.

If this process seems too complicated, consider upgrading to TurboTax Live Assisted Business, which provides a tax expert to walk you through the steps.