Terry D EA Posted October 25, 2022 Report Share Posted October 25, 2022 An LLC was formed as a partnership. One of the partner's terminated their interest before the end of 2020. TY 2020 form 1065 was filed as the initial return. The partner's shared 20K loss. What I have seen in the partner's K-1, the basis of the departing partner was reduced by the loss and there is no gain on the return of any remaining basis or capital accounts. Please be kind here I am still gathering information. I don't know how you file an initial and final return in the same year. What I do know for sure is the partnership ceased to exist prior to the end of TY 2020. For TY 2021, am I correct the business is now a disregarded entity and is filed on Sch C with the remaining partner's 1040. BTW- This is a simple partnership, no employees, no assets other than cash as far as I can tell. Only depreciation was amortization of some startup expenses. There will be another partner added, so I assume it is ok to keep the EIN and reopen the partnership when one indeed exists. I am going to tell this client to not do this on his own. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted October 25, 2022 Report Share Posted October 25, 2022 You file a final short-year 2020 partnership return, ending the last day of the partnership. Check the Initial and Final return boxes on Form 1065, and check the Final boxes on Forms K-1. Then the remaining no-longer-partner has a Schedule C for the remainder of 2020 and future years, as long as they remain a SMLLC or sole proprietor. Are you preparing the partnership returns for 2020? Or is one of the former partners your client for 2020 and 2021? 1 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted October 25, 2022 Author Report Share Posted October 25, 2022 Just to add, because the partnership ceased to exist prior to the end of TY 2020, should a short return have been filed? If so, should the original filing for 2020 be amended? Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted October 25, 2022 Author Report Share Posted October 25, 2022 Lion, you were reding my mind on the short year. New client for me, an accountant in NY prepared the 1065 and apparently wasn't aware the partnership had ended. I will be filing the remaining no longer partner's personal return with a Sch C as a disregarded entity. Just need to know if it is necessary to amend the 2020 1065 for a short year. I will find out from the client when the other partner left. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted October 25, 2022 Report Share Posted October 25, 2022 4 minutes ago, Lion EA said: You file a final short-year 2020 partnership return, ending the last day of the partnership. Check the Initial and Final return boxes on Form 1065, and check the Final boxes on Forms K-1. Then the remaining no-longer-partner has a Schedule C for the remainder of 2020 and future years, as long as they remain a SMLLC or sole proprietor. Are you preparing the partnership returns for 2020? Or is one of the former partners your client for 2020 and 2021? Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted October 25, 2022 Author Report Share Posted October 25, 2022 Thanks, Lion, I got it. Form 1065 for TY 2020 has already been filed by another accountant as I stated. So, should the return be amended to reflect the short year and closing of the partnership? Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted October 25, 2022 Author Report Share Posted October 25, 2022 Update, client just confirmed they have the proper documentation and agreed to enter the partnership effective 12/31/2020. He originally told me the other partner left before the end of the year which triggered all of my thought. Now it is easy. 2 Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.