Partner Buyout Resulting in Negative Capital, 754/743(b) Step-Up

[greh]

Business was a 6 Member LLC.  One Member sold his interest to the Company which was re-distributed to the remaining Members.  I'm having three issues in how to make this transaction work in Turbo Tax (assuming my understanding of the flow in the 1065 is actually correct ...)

QUESTION 1: Selling Member now has negative ending capital and I need to re-distribute this to the remaining Members based on our current (post-buyout) ownership interests.  How to do this in Turbo Tax?

QUESTION 2: Then we are making the 754/743(b) basis step-up election.  I created a new asset as of the first day of the month immediately after the buyout month and checked the box for "Check if IRC Section 754 Adjustment".  However, the selling partner is now receiving some 754 depreciation in the Box 13W.  I wanted to make a Special Allocation for just the 754 depreciation to the 5 remaining Members based on our current (post-buyout) ownership interests, but not sure how to do this in Turbo Tax?  It just defaults to giving everyone a share of it based on weighted average ownership throughout the year.

QUESTION 3: As a result of 754/743(b) need to step up each remaining Member's capital.  So basically there is really no change in our capital as a result of the transaction (it goes down to absorb the negative ending capital from selling Member, and back up in same amount for the basis adjustment).  How to do this in Turbo Tax?

[M-MTax · Accepted solution]

I'll bet you'll have to use forms view for most of what you're entering. I'm pretty sure I read somewhere here that there's a part right in the beginning where you can choose that the P-ship makes special allocations so you should check that out. Then there's a partner area where you enter capital accounts and the like but you might have to enter some or most on the forms or worksheets in forms view.

[greh]

Thanks for your response.

I already have the Special Allocations box checked and have been doing most of the work in Forms so far.  I do see on the Sch K Worksheets an area for Special Allocations but I just don't know how to make use of it. - i.e. how to make it apply to only Box 13W for the K-1 (or really how to use it in general).  Also tried going directly to Sch K-1 in Forms Mode to change the Box directly, but as I had figured it would be, it is a non-editable box.

As for the capital movement, I've already tried to input the movement in the Sch K Worksheet in Forms Mode but then it doesn't seem to flow to the actual K-1.

It almost seems as if what I am trying to do is not what I am supposed to be doing ...

[M-MTax]

not sure if turbotax can give you any instructions for how to do this in turbotax but there's a customer service number so you can give it a try. If you can't get anything out of customer service you should see a tax pro b/c these calcs and entries are very difficult to get right.....you don't want to mess this up.

[greh]

I was actually able to figure it out yesterday, I had initially missed the Special Allocations Demo when going through the Step-by-Step.  So then in the Forms view, the skinny column "SA" is where I would indicate I wanted to specially allocate a line item, then on the Sch. K worksheets I would use the same code and then the desired amount for each partner.