Question

Transferring ownership to other members of LLC - TT Business

Forum|Forum|2 years ago
February 25, 2024
1 reply
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I am part of a 3 member LLC in Texas. In 2023, the other two members bought me out equally. The partnership will now move from 33.33 x 3 members to 50 x 2 members. I am using Turbo Tax 2023. The LLC itself doesn't have much assets. What the other two members paid me was little more than ($3k) my capital account balance as for 2022. I could not show this as a gain for corporation - as it is my personal capital gain. At the end of 2023, my capital account should be zero and my K1 should show gain of $3k. I am not finding a way to input $3k gain in my K1 as a capital gains. I want to add $3k to the Section L, other increase line item and also show $3k in line 9a of K1.

Is there a over-ride function that I can type in these values into my K1 (not the others)?

How do you suggest I handle this in TT 2023 Business?

Thanks a lot for the input in advance.

TurboTax Business Windows

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RobertB4444

You shouldn't be entering your sale and the gain on it into the K-1s at all. That's a personal gain for your personal return. You should enter your sale of the S-corp shares into the schedule D section of your personal return showing the full purchase price you received and the full basis that is deducted so you have a net gain of $3000 on your personal return to pay capital gains tax on.

The K-1 should only reflect your share of the earnings through the date of the year that you sold your interest. If should be marked 'final K-1' and reflect a prorated percentage of ownership based on the date of transfer. The same is true of your two (former) partners who should be absorbing your shares on the K-1s. The sale itself is just a sale of stock for which you did not receive a 1099-B.

@bchakka11

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bchakka11Author

Thank you @RobertB4444 .

This is not a S-corporation. This is sale/transfer of share of LLC. So, the other two partners paid $10k each into the LLC and their capital accounts went from $17k to $27k (for each partner). My K1 from LLC shows that my capital account is zero at the end (Start $17k, basis adjustment $3k, distribution of $20k).

Is the process same if it is LLC vs. S-corp. If I want to put in the Schedule-D, what kind of record will I have to show basis and sale price?

Your response is much appreciated.