Denne Posted March 6, 2008 Report Share Posted March 6, 2008 This is a new client for me. The two members of the LLC could not work out their differences. They decided to dissolve the LlC and filed a final return in 2006. There was more than $100,000.00 in oustanding loans in my clients name (since the other member didn't have good credit.) He took the $100,000.00 out if his retirement account to pay off the loans and has also sold some of the equipment that is remaining in his possession. He ended up paying several thousand in interest and also the fees for last year's tax returns. There was no income for 2007 although he will be starting up a little side business at some point this year or next. How would you handle the expenses he is paying for? The other member is not paying for anything so he has really been stuck and having to pay to keep his good credit. What a mess, huh? Sounds like a lesson was learned here ;~) Thanks for your assistance...... Quote Link to comment Share on other sites More sharing options...
jainen Posted March 6, 2008 Report Share Posted March 6, 2008 >>a lesson was learned here<< We all hate bankers, but you have to admit they are often right. Quote Link to comment Share on other sites More sharing options...
lbbwest Posted March 6, 2008 Report Share Posted March 6, 2008 >>a lesson was learned here<< We all hate bankers, but you have to admit they are often right. Just proves Lucho is right and you have a heart, (and I never believed in inductive reasoning before.) Quote Link to comment Share on other sites More sharing options...
OldJack Posted March 6, 2008 Report Share Posted March 6, 2008 How would you handle the expenses he is paying for? I don't know what hate the bankers has anything to do with your questions. However, your client's situation is difficult to give an answer for since there are a lot of facts that you must establish. Here are some items for your thought: 1) You say he sold some equipment which I presume was a distribution to him from the LLC and that must be reported on form 4797 with recognizing gain or loss from the items tax basis in the LLC. 2) If the loan was from the bank to the LLC, with his personal guarantee, I would deduct his principal and interest payments as a bad debt on form 1040 Sch-E, page 2. 3) If the loan was to him personally and the LLC owed him, then the loan payments are not deductible but the loan to the LLC would either be a bad debt deduction on 1040 Sch-E, page 2, OR it would be a part of his LLC tax basis for capital gain/loss. Such classification may depend upon proper documentation of the loan, no documentation then capital gain/loss for 1040 Sch-D. Other LLC partners obligations are irrelevant to your clients current tax situation. Protecting his good credit is irrelevant. His starting a new business is irrelevant. Quote Link to comment Share on other sites More sharing options...
jainen Posted March 6, 2008 Report Share Posted March 6, 2008 >>what hate the bankers has anything to do with your questions<< Nothing. I didn't know the answer, so rather than shutting up I decided to blame the victim for not recognizing that there was a reason the professional money lenders wouldn't deal with his partner. Quote Link to comment Share on other sites More sharing options...
OldJack Posted March 6, 2008 Report Share Posted March 6, 2008 >>Nothing. I didn't know the answer<< Oh... that makes perfect sense. :P Quote Link to comment Share on other sites More sharing options...
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