David

Yes. My question now wasn't asking the same question I had in July. I was Okay with the help you, Jack and others gave me regarding transferring assets at the LLC member's basis and booking the difference between FMV vs member's basis as non-depreciable assets on the LLC's books so that the member's capital accounts could be properly recorded. My question now is what have any of you done in this situation when neither of the LLC members wants to go to the trouble of giving the FMV for the huge amount of assets transferred into the LLC? If the FMV is about the same as the NBV, then there shouldn't be a problem. But if it isn't approximately the same, then each member isn't getting the proper amount of capital credited to them. Sorry to cause any confusion.

Thanks, Abby Normal for the link. That supports the treatment I want to do. However, since the LLC members don't want to assign the FMV to all of the assets, I'm wondering if it is a problem just to transfer the assets at NBV and continue the depreciation. Has anyone dealt with this situation and found that it really didn't matter? Thanks.

They are and the depreciation is continued. However, the basis of the assets to the partnership is supposed to be the FMV at the date of contribution.

I have 2 clients who used to have separate Sch C businesses and decided to form an LLC and go into business together. They transferred all of their equipment into the LLC. There is a huge number of items. I have the depreciation schedules from each of their prior year Sch C businesses so I have the net book values. Since there are so many assets, they don't want to go to the trouble of assigning FMV to each of the assets transferred in. Before I try to convince them to give me the FMV of each asset I want to know if there is a problem if I don't assign additional capital to each member based on the difference between FMV and NBV? I know that when the LLC sells the equipment, the gain will be greater to the LLC, which will be allocated 50-50 to each member anyway. Maybe the difference isn't material between that method vs.each member reporting the difference between FMV and NBV as gain on their individual tax return and the LLC reporting gain based on the difference between selling price less current FMV? Has anyone dealt with this issue before? How did you handle it? Thanks.

Thanks everyone for your help with this.

Does anyone have a cite regarding trac leasing of a vehicle? The only thing I can find are private letter rulings, which can't be used as a cite or to support tax treatment of a trac lease. My client, a S Corp single shareholder, is being told by colleagues that by doing a trac lease they are able to write off the complete cost of their SUVs if they use them at least 50% for business. I would think that if the IRS allows operating lease treatment for a vehicle that is being leased under a trac leasing arrangement, that only the business use % of the rental payments would be deductible and not the total rent payments. Has anyone dealt with trac leasing and have cites to support the operating lease treatment for the lessee? Thanks.

That's what I would prefer to do. Thanks for your help.

ProSeries

BTW, I'm surprised that the error check didn't catch that. I guess it doesn't match against the K-1 information?

LLC had 2 members with 50% ownership each until 1/1/15. In 2015 another member was added with only 1/2% ownership. I just noticed that the 2015 and 2016 Schedule B-1 still reports the original members with each having 50% ownership. The K-1s have the correct informaiton. The 2015 tax return was filed last year and the 2016 tax return was filed on 9/15/17. The client hasn't received anything from the IRS regarding the 2015 Sch. B-1. Is it necessary to amend the 1065 just for the change on Sch. B-1? Or just correct it going forward? Thanks.

Thanks, Lynn. So no need to file form 6198 since all is at risk?

W is the owner of a Schedule C business. H works in the business but was not paid. The business had $69K loss in 2015 and $94K loss in 2016 and the business was closed in 2016. The W's father-in-law loaned her $207K to start the business, buy equipment, etc. There is no loan agreement with timing of payments, collateral, etc. She is expected to pay back all of the loan. In the instructions for Form 6198 a father-in-law is not listed as a related person. He also doesn't have an interest in the business and is a creditor only. There is no definition as to "have an interest in the business" so I'm not sure if the H is considered as having an interest in the business which would disqualify the father-in-law's loan as at risk. Are the 2015 and 2016 losses considered at risk since the father-in-law still expects the loan to be paid? Thanks for your help.

TP's MFJ 1040 line 41 is negative $18 and taxable income on line 44 is 0. They are subject to the excess advance premium tax credit repayment on line 46 for $1,092, which is the only tax liability they have. They have a $249 FTC carry forward and a current year FTC of $267 for a total FTC of $516 on line 48. Form 1116 instructions and pub. 514 state that the FTC cannot be more than your total US tax liability (Form 1040, lines 44 and 46. So it appears that even though the foreign taxes paid weren't subject to regular taxes, the FTC can still be used to reduce the excess advance premium tax credit repayment on line 46. Form 1116 line 17 foreign source income shows $2,376, line 18 taxable income shows 0 and line 19 shows 1. The "1" on line 19 appears to be correct since the instructions say that if line 17 is greater than line 18, enter 1. In my research on this I read that the IRS has disallowed the FTC when the only tax liability was the excess advance premium tax credit repayment. It makes sense since the foreign taxes weren't subject to regular tax. However, the IRS publication and instructions seem to support taking the FTC even if the only tax liability is the excess advance premium tax credit repayment. Has anyone had this situation and found that the IRS disallowed the FTC for your client? I want to make sure my clients won't have any issue if they take the credit. Thanks.

Judy, Thanks for your help on this. So my earlier statement that the Partner's capital is $400K and his basis is $100K is correct? I previously thought the capital attributed to the partner and the basis attributed to the partner had to be the same for contributed property. Thanks.

Thanks, Judy. I guess I am confused by the basis vs. capital credited to the contributing partner. Everything I read says that the partner get basis for his basis in the property. Even the article you attached states this: So in your example does the partner have capital of $400K and basis of only $100K? Or does he have capital and basis of $400K? Thanks for your help.

Ok, maybe my questions wasn't clear and didn't make sense. Let's try this. Based on my research it appears that the partner gets basis for the NBV of assets contributed and gets capital contribution amount for the FMV of assets contributed. Is this correct? So if a partner contributes property with a FMV of $400K and NBV of $100K how is this reported on the tax return, especially the balance sheet? Is it the following? Fixed assets at NBV and depreciation continues as was when in the partner's hands. The excess of FMV vs NBV is recorded as fixed assets but not depreciated. Or is this recorded as Other Assets? FMV of assets recorded as capital contribution. Therefore the balance sheet will be reported as follows: DR CR Fixed Assets (only $100K depreciated) $400K Partner Capital $400K The partner basis statement will show basis as $100K (not sure why the basis wouldn't be $400K). Thanks for clarifying this for me.

Thanks, Judy.

Since ProSeries doesn't include form 5500-EZ how do any of you file this form? Where is the best place to find it? Thanks for your help.

Is the difference between FMV and net book value reported on the depreciation schedule or is it only recorded as a non-depreciable asset on the books? If the difference per asset is recorded on the depreciation schedule as non-depreciable, the amount will be considered as part of the gain/loss when the asset is sold. This doesn't seem correct to me. Am I off base here or is my understanding correct on how to actually handle this situation? Thanks for your help.

A 50% member of a two member LLC agreed to sale his LLC interest to the remaining LLC member for release from debt liability. The date of the agreement is 4/3/17. I understand that a short year 1065 is due 7/15/17 and an extension should be filed by 7/17/17. All my research gives examples of more than two member partnerships/LLCs. Nothing seems to address what happens with the remaining sole LLC member. All information states that the partnership continues but in this case there is no partnership but a SMLLC. Therefore, after the short year 1065 is filed doesn't the remaining LLC member file a Sch C for the period 4/3/17 - 12/31/17? Thanks for your help.

2 taxpayers had schedule C businesses in 2016 and formed an LLC in November 2016. They both contributed equipment and other fixed assets to the LLC. I know that the partnership steps into the shoes of the partners as far as depreciating the assets. How is this reported on the asset entry worksheets? Do I use the partner's original purchase date, purchase price, accumulated depreciation, etc.? I don't see how depreciation would be continued without entering the original information. However, I'm not sure a purchase date can be entered that is prior to the LLC formation date. How have those of you who had this issue handled it? Thanks for your help.

Thanks, Max. I see that in pub. 544 but does that qualify as ownership that meets the sec. 121 gain exclusion? Thanks.

TPs leased their primary residence from 2010 until they purchased the house in 2013. They sold the house in 2014. I can't find any cites or information that says that the lease to own time period counts as qualified use for the gain exclusion. I want to make sure that the TPs don't qualify for the gain exclusion before making the assumption that the qualified use begins on the date they purchased the house. Thanks.

Thanks. Is the lowest bronze plan premium for each child also considered in the calculation? I would think so even if they are covered by a government plan since they are counted in the household size. The links for the lowest bronze plan premium point to Colorado Health Connect. When I go to their site, the web page no longer exists. I found another site that gave the bronze plan premium for Colorado but it only asked the age of the head of the household and gave a $249 per month premium. It didn't ask how many family members. Is it reasonable that that would be the monthly premium for a family of 6? Thanks for your help.

Parents don't have health insurance coverage but the 4 kids are covered by a government program. I am trying to determine if the TPs qualify for the affordability exemption. The instructions aren't clear (at least to me) whether the household size includes the kids or not since they are covered by a government health insurance program. The TPs AGI is $88K. If the household size is 6 for the affordability exemption calculation then the income is 275% above the poverty level. If the calculation should be based on a household size of 2 since the kids are already covered, then the income is well above the poverty level. It seems as though the affordabiltty calculation should be based on the household size of the number of people not covered when all other family members are covered by a government program. However, I don't see any clear instructions regarding this in any of the ACA material. Can anyone clarify this for me? Thanks.