Discussion:RE Partnerhsip Buyout
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| 13 April 2007 | |
| Client owns vacation home 50/50 with his in-laws in a LLC partnership. RE is titled in in-laws name. LLC OA has provision for my client to buy-out the in-laws for their contributed capital plus simple 15%. My client initiates that buyout in 2006 by refinancing the property and transferring the title to himself. Settlement statement lists my client as buyer and in-laws as seller with the inlaws receiveing cash at closing of $400k, I believe they received a 1099-s. In-laws kept 100k which represented their capital plus return and returned 300k to my client which is basically a cash-out refinancing for him.
The gains here are fairly easy to figure but they are computed through the OA and do not have a direct tie to the other source docs. My concern is that the closing statements and 1099-s paint a completely different picture than the parties intent. Any advice on how to report this transaction with minimal mail from the Service? How does the Service reconcile 1099-S to individuals when the transaction is flowing through a partnership? I haven't done many parntership buy-outs and am very close to shipping it up-stream unless I can get some comfort on it this weekend. Any thought are appreciated. Will | |
| 13 April 2007 | |
| Why at closing were the in-laws given $400K, just to have them return it to your client? It sounds like someone set it up as a sale for $400K. Bad result for the in laws, especially since they only kept $100K. Sounds like maybe your client needed to show it as a purchase by him for FMV to get his financing...I'd be very wary of this...it may be late in tax season, but something doesnt seem right here. | |
| 13 April 2007 | |
| Glmpllc said:Sounds like maybe your client needed to show it as a purchase by him for FMV to get his financing.
And now it all comes together in my mind. It has been very hard to get my client to explain this transaction to me coherently. Nothing was making sense and the OA appeared only after I pointed out the gain to his in-laws. I'm going to send it away, I just don't understand enough about the transaction or the relevant partnership level elections honestly. Thanks again glmp, you have helped me out at a couple of key points this season. I may just reach a point that I can return the favor....stay tuned. | |
