Discussion:1065 partner quitted, remain H&W
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Discussion Forum Index --> Tax Questions --> 1065 partner quitted, remain H&W
| 28 February 2008 | |
| Dear CPAs/Taxproffessionals:
A client has a restaurant with his brother for 2 & 1/2 years. Been filing 1065 in last two years. Then his brother quitted on him end of June 07. Then his wife jumped in to help him running it. I don't know how I should file this partnership tax. Should I file 1065 between my client & his brother from Jan to June? Then another 1065 between him and his wife from July to Dec? Please give me some input. I am confused... Thanks a bunch! | |
| 28 February 2008 | |
| You got both a hot tamale and a live wire on your hands here.
Why not file a short year 1065 for the brothers Grimm, and put HW on a Scd C for that portion(i.e. last half of the year)? But remember, you don't represent the brother (or do you? think about it), so be careful making decisions for him. Have your clients (who are your clients?) meet with a lawyer/insurance man because things will have to be changed to operate as sole P. And KEEP IT AS SOLE P for a while until you see what's up. Watch out for conflict of interest, this is riddled with possibilities. | |
| 28 February 2008 | |
| CrowJD, thanks so much for your advice.
So I am right 1/2 year on 1065 for 2 brothers. What about 1065 for h&w? According to IRS, if h&w is operating same business, making equal decision (whatever that is, women always decision makers :>), then we need to file 1065 for them, so if I file schc, would that be against the rules? You guys are the best!!! I hate calling IRS, was on hold forevever, and they transfer me around, or put me on hold again... | |
| 28 February 2008 | |
| Best thing to do is to have them set down with two sets of lawyers. Yes, wife could buy out brothers portion and they could continue on in the same LLC or whatever. This was not handled in a professional way by the people involved to begin with (during 2007). You are administering First Aid for last year, and be darn careful doing it.
Sounds like brothers were just a partnerhsip, not an LLC taxed as partnership. When one partner quits, dies etc., the partnership automatically dissolves (usually). So that's one issue, a short year final 1065. Review your law on the Sole Prop.: the current law. Can't H-W file Scd. C's? Couln't they both be on a Scd. C for a half year. There's a lot of potential issues here, especially if they are/were making money. These things usually end up in a trust fund penalty, but more on that later, next year. Don't thank us yet! | |
