User talk:FTF65
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FTF 65,
Thanks for your insightful response to my "Dissolution & Continuation of Partnership" question. It does clear up the matter. One additional question, do we actually file two different Form 1065's for 2006? (i.e. one w/Partners A & B and one w/Partners A & C under the same FEIN & Name - both short years)??
Regards,
DmcDavid 12:29, 5 February 2007 (CST)
Dissolution & Continuation of Partnership
FTF 65,
Thanks again for you insightful response.
Regards,
Dave
Partnership Land Sale
FTF65,
You were so helpful w/my last question. I was hoping you could add your expertise to my current issue, which can be found as a new Discussion Tax Item called Partnership Land Sale. I value your insight.
Regards,
Dave
I have a Partnership who is engaged in Leasing Commercial Real Estate. During the first year, the Partnership bought a piece of Land to fit out a builiding for a Lessee. The pad site had two tax parcels. During year two, one of the Tax Parcels (Land Only, not improved) was sold for a Short Term Capital Gain while the other was earning Rental Income from the Lessee. Questions....
1) My tax program is placing the gain from Form 4797 on Line # 19 (Net Gain from Disposition of Rental Real Estate Activities) of Form 8825 - Rental Real Estate Income & Expenses. Is this correct?
2) As a result of the above treatment, the aforementioned Gain is buried on Line 2 (Profit/Loss From Rental Real Estate Activities) of the K-1. Is this correct?
3) I was expecting that the Short-Term Gain was a seperate pass through K-1 item. Can you confirm? If so, does it flow out on Line 1 Ordinary Income or Line 8 Net Short-Term Gain from form 4797?
I appreciate anyones insight into the above questions. Thanks for your help.
Regards,
Dave
Hi, thanks again for your help. I posted this this morning. Harlan
Since I appear to be missing something, allow me to restate the facts as I understand them: (i) S Corp has 4 properties, each one holding a different business of the taxpayers; (ii) prior to the 2006 "LLC spin-off", 2 of the properties were titled in the name of the corporation and two were titled under the names of the two individual shareholders (but are recorded on the corporation's books); (iii) sometime during 2006, the 4 buildings were transferred ("spun-off") to LLC's and title was recorded in the name of each LLC (note: from a tax perspective, the corporation contributed assets to LLC's and distributed LLC interests out to shareholders or corporation distributes assets out to shareholders who, in turn, contribute assets to the LLC's); (iv) all 4 LLC's are owned 50/50 by the two individuals. Some comments:
Ownership of the two individually-titled properties: although title to the property is a key element, it is not the only factor in determining ownership for tax purposes - a "benefits and burdens" analysis might produce a different result depending on other facts (is the S corporation paying property taxes, mortgage, maintenance?, etc...); Because the individually-titled properties have been reflected on the S Corp tax returns, presumably you will have to record an M-2 adjustment ("Other Decrease") to get the assets (and related liabilities) off the returns without showing a distribution (or sale). Depending on the size of the adjustment, this could raise the audit flags; Corporate-titled properties: with respect to the 2006 "spin-off" to the LLC's, it appears that you have a couple of options (i) recognize a 311(b) gain on the distribution of the assets, or (ii) check the box on the LLC's to make them corporations in order to accomplish a 355 spin-off. If (ii) is applicable, this could work provided that you make the check-the-box election in a timely manner - you haven't indicated the dates of formation for the LLC's, so it's not clear if this is still possible [note: if (i) is applicable, checking-the-box on the LLC's makes no sense (you have already recognized the gain once, checking the box only puts the taxpayers right back in the same position)]. As for depreciable basis with respect to a 355 spin off - assuming that you qualify for one - you would treat as carryover basis.
HLCPA (talk|edits) said:
1 March 2007
Thanks again for all your input, I GREATLY appreciate it. I have 2 last (hopefully) questions. Now that I am getting into the numbers, I see that the mortgages against some of the properties are more than the net book cost (cost - accum depr) for 2 of the 4 properties.
One owned personally has cost 634,000 and loan 884,000 One owned by corp has cost 344,000 and loan 417,000 One owned by corp has cost 1,096,000 and loan 901,000 One owned personally has cost 1,416,000 and loan 1,279,000
I was able to get S-election for the two with the corp ownership.
My question is how I would book this on the old corp and on the new entities. Would I book the net between the cost and loans as "property distribution" or "shareholders contribution" depending on whether the loan was more or less than basis? Or some other way?
On the new entities, would I book the cost and accum depr as of transfer date,and loan payable, and make the balance members contribution for LLC's taxed as ptnship, or I dont know what on the LLC's taxed as S-corps? What would I put the net to? Thanks again.
Thanks
FTF65, I just want to thank you again for your help on the partnership I was working on. I am just now wrapping it up. I have printed out and worked through a couple of your posts, and they were very helpful. I learned a lot. Thank you. Jessica
Please get in touch
Hi FTF65,
Please email me and let me know how to get in touch with you. I'd like to use your services.
Thanks. Bill 19:55, 11 July 2007 (CDT)
Disguised sale
Thanks for your help, I needed a second pair of eyes on this one Wcmcm 14:57, 4 September 2007 (CDT)
If you have the time?
Will you look at this discussion and offer your advice? Thanks, BethAZ 15:58, 11 September 2007 (CDT)
re: Time
I hear you. Being a CPA is great except for the Public. At your convenience, and I sure appreciate your attention to my question. BethAZ 19:49, 11 September 2007 (CDT)
Thank you
You are just wonderful for taking the time to help untangle that issue regarding LT contracts and methods of reporting. BethAZ 01:38, 13 September 2007 (CDT)
Profits interest post
Great information. Are you aware of any CPE material I might get that covers, for instance, profesional partnerships or service business opeating as LLC/Partnerships. It's amazing, I've bought several books, and CPE manuals, and this is never covered. Particularly the items you mentioned in your last post. They might give a few examples of flexibility in allocations, but frankly, most cover real estate type developments, or an investment type partnership it seems. Thanks again. CrowJD 09:17, 16 September 2007 (CDT)
Second quick note
FTF: It's rather funny how I found myself knee deep in service business LLC's. So many people today will set up their own companies online (without a lawyer), and since the LLC "seems" so popular, why they just choose the LLC! So, I usually get these things a year later... and for a beginner in partnership accounting AND the complexities inherent in the LLC's... well, I've been pulling out what hair I have left. It will probably be a blessing in the long run if I don't go broke from buying materials first. CrowJD 09:33, 16 September 2007 (CDT)
LLC issues, multi property, multi partner
hi we may need help on a complex sale of LLC real estate within the entities (5 entities)
are you available/
thks
eran
pecorino1@earthlink.net
If you have a minute?
Hi - if you have a minute and the inclination, will you look at my question? I'm stuck and think the answer might be easy.
http://www.taxalmanac.org/index.php/Discussion:Nobody_knows_the_3115_I%27ve_seen.
Thanks and hope your tax season is going well. Beth 21:47, 11 March 2008 (CDT)
real estate development
Dear FTF65,
I am working on a partnership return concerning real estate development and am looking for guidance to confirm what I already researched. You seem to have experience in this area. If you are interested in arranging a consulting phone conversation for a fee, please contact me at mdhcpa@verizon.net with your phone number and I will call. Thank you.
http://www.taxalmanac.org/index.php/Discussion:Partnership_-_Technical_Termination
Hi -
I added one question to a long string of answers tonight. Could you take a quick look and answer my question. I think it should be very easy for you to confirm. You really know your partnership tax law :)
Thanks
Kimberly
1065 tax return and 704(b) regulations
Hi, I hope I am not being to intrusive by contacting you directly. But I have read some of your comments on this issue and believe you can clarify this issue for me if you have the time to respond.
I have been doing research for several days on 704(b) regulations and 704(c) assets. I understand the need to keep different sets of books regarding this matter. I also understand how to do so.
My question arises from filing a 1065 tax return. Can I still file the tax return as "tax basis" as far as the repoting of the asset on the schedule L and the section N on the K-1 marked tax basis for the capitals accounts? I am I required to show the capital accounts on the 1065 at "book" on the K-1 one section N and on the M-2.
I have spoke to some local accountants near me and to my surprise they were unaware of the 704(b) regulations or 704(c) assets. So of course they were no help there. I have even been on a couple of other sites but unable to get a clear answer.
What I have exactly is partner A contributed an asset FMV 39,000 and adjusted basis 25,000. Parnter B contibuted 39,000 cash. This was done later in the year of 2007 after the partnership had started. There is NOT a written agreement. Though they were advised many many times to do so. And all of this information has been provided to me after the fact. Both partners had verbally agreed to split profits and losses equally.
Again, my questions concern how to relate this to the 1065 properly. It is unclear if I have to show the capital accounts and the balance sheet on the 1065 as required by 704(b). Or just maintain a set of books according to 704(b), and still show balance sheet (schedule L) and capital accounts as tax basis on the 1065 return.
Your opinion on this is greatly appreciated. And my apologies for my confusion on this matter.
profits interest
Hello FTF65,
I have a quick question regarding a profits interest. i have recently formed an llc to acquire an office building. i received a $X profits interest from my other partner. i am having a hard time understanding the actual entries for this event. i have been looking at it as though we were buying a $100 building all cash. we are putting up $40 and our partner is putting up $60, now we are getting a $10 profits interest. what does it look like from here? does the denominator increase by $10 so the total deal cap is $110. our capital account is $40 or is it $50? thank you very much for your help.
also if its a profits interest are we required to make contributions on this portion if there is a capital call?
Partnership thecnical termination - Single Member LLC
Hello FTF65,
I would appreciate very much if you can give me some advice about the following situation: An LLC with two partners: C corporation (51%) and an individual (49%). The individual sold her full ownership interest to partner C corp triggering a technical termination. The transfer made the C corp the sole owner and disregarded as an entity separate from its owner because there was not an election to be treated as a separate entity for tax purposes.
Revenue ruling 99-6 provides guidance when a multiple member LLC is converted to a single-owner entitiy for tax purposes.
Under Rev. Rul 99-6, the partnership is deemed terminated for federal tax purposes under Sec. 708(b)1(A), even though for state law purposes the company continues to operate the LLC (a state law single-member LLC).
The partnership has no unrealized receivables or inventory items. The partnership is deemed to have made a liquidating distribution of all its assets to both members; following the distribution, partner C corp is treated as acquired from the other partner all the assets deemed to have been received by her in the liquidation distribution.
I know that I have to file a final return for the terminated partnership for that short period. My problem is closing the capital accounts because both partners have negative capital accounts and there was a loss for that short period. Partner's capital accounts is in tax basis.
How should I bring the negative capital accounts of both partners to zero? Should the final return show the schedule L, zero balance in all accounts?
Thank you very much for any input.
Capitalized Interest
I have searched and read the threads regarding Capitalized interest. I have one additional question.
When homes are started to be built and sold is the current years interest on the land loan capitalized each year to the lots sold and unsold ?
Csks 07:23, 16 March 2009 (CDT)
Thanks
