As a follow-up, the current amount of $11.7 gift tax exemption is very likely to change effective 1/1/2022. Since the only bill at this time is in the Senate, the exemption amount there is approximately $6 mil. All tax legislation must begin in the House and any differences between a House bill and Senate bill is then reconciled in Joint Conference.  As of this response, we are not anywhere near understanding what the exemption amount will be.  However, most likely, the exemption amount will suffice for most taxpayers; meaning no gift / estate tax at the federal level.  Keep in mind, that states have differing rules so it is best you look into your particular state treatment as well. ... View more

In reading through the facts and comments: Just so you understand, for tax purposes your LLC is technically owned by two individuals.  This is due to the fact, that a SMLLC is a disregarded entity for tax purpose; unless an election is made to treat it as an association. Based on bullet 1, you don't have a "holding company".  What you are describing as a holding company is "you" for tax purposes. Your terminology is not real clear.  You note a "prospective business partner" and then you go on to indicate that you already have an LLC with this individual.  So are you saying that your partner in your LLC has another business that you want to own as well? As I am reading through the facts, there can never be a handshake agreement for all parties protection.  Any agreement reached needs to be in writing. If I am reading this correctly, and I asked for clarification in bullet 3, you can't structure this as if you are buying the business and then act as if it is owned by the LLC and split the profits 50/50. One way this works is if you buy into the "new" business and then you now have a second LLC. This gets complicated as you will most likely have to deal with step up in basis (Section 754) and then maybe built-in gain (Section 704(c)).  Both of these code sections can get complicated and require special bookkeeping and tax allocations. The other way is for the current LLC to acquire the business. In this case it gets even more complicated as there will be step up for you but not for your other partner as he won't get step up on assets that he already owned. The other issue that hasn't been mentioned is how you arrived at the purchase price. Typically, at least in the acquisitions I have been involved in, the buyer needs to perform some type of business valuation; whether that be based on profitability and factoring in some multiplication factor or based on assets being acquired. Honestly, the comments above are only the tip of the iceberg and this question is really beyond the scope of a forum such as this.  There are too many additional facts, scenarios, other questions that are best done through a one on one discussion with a tax professional.  Unfortunately, in the tax world, the actual $$ involved in a transaction such as this, don't make the tax issues any easier.  It's just smaller numbers, but from the IRS' perspective getting the correct tax result is the same. Additionally, in looking at the facts, you definitely need to be cognizant of some issues associated with the business you are looking to acquire.  A business paying out cash and no W-2 or 1099 is an open book for significant tax issues and penalties.  This just reinforces that the agreement needs to be in writing that you are buying assets.  This issue in of itself would give me pause, but I could most likely get over it in some type of an asset acquisition structure. You need to make an appointment with a tax professional.  Don't be penny wise and pound foolish.  The tax world can be cruel if not careful. ... View more

A few following up questions: Do you have a K-1 that reflects it is a final K-1? Based on your facts, it appears that you had a single shareholder S corp.  Did you file a final return for the S corp? Have you maintained your basis in your S corp? What was distributed out when the S corp liquidated? property cash We need some additional facts to provide some guidance. ... View more

There are too many hypotheticals in this question for anyone on this forum to provide an accurate response. The only person who can answer this is the individual that prepares the company tax return.  It is that person who needs to get comfortable with the facts since they are signing the tax return. Not sufficient understanding of the facts in a forum setting such as this. Based on the limited facts, I think the IRS would challenge this deduction, unless of course the company included this cost in your wages.   ... View more

Wait.  @Critter-3 what is a pencil and paper????  Can we still buy that!!!! LOL. ... View more

Take a look at your form 4797 and follow the lines. Recapture is determined in Part III and then carried to other parts of the return. As an example, Section 1245 recapture on line 25b gets totaled on line 31 and is then carried to Part II line 13 and ends up getting taxed as ordinary income. Once again, either print out your return and follow the forms or review it online.   ... View more

Question addressed in this post (duplicate question): https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/we-do-not-want-to-be-double-taxed/00/2360709   ... View more

As noted by @Mike9241 we can't see any details, however, my thoughts are as follows: As noted in another post, you do not want to duplicate the information in two places which could result in double the gain. In my mind, entering the 1099-B info to arrive at a zero gain or loss makes sense if you are entering all the sales information in the K-1 interview process.  Doing this will arrive at the correct answer and be reported in the correct area of the tax return. In cases such as this, handling the final K-1 current year details and sale matters in the K-1 section is a cleaner process. The above assumes you know what your tax basis is in your S corp stock.  This is needed regardless of how you enter the information into TT. As you noted, the IRS is only receiving the proceeds figure on form 1099-B and that is all they are looking to match in their system.  As a result, you do need to reflect this figure on form 8949 which will carry to Schedule D, but will result in a zero gain / loss as noted above.  This avoids any matching notice. ... View more

To expand on @SundayInSalem comments, it appears, based on the limited facts, that you have someone preparing the partnership return. If the assumption is correct, this individual will need your signature on the form 8453-PE in order to allow them to electronically file the partnership return (form 1065). This form (8453-PE) needs to be signed and dated and returned to the preparer.   As noted in a previous comment, you will then receive a schedule K-1 with the necessary information to input into TT. ... View more