Hello,
Can someone give me advice on whether or not I'm recording the sale of a partnership interest correctly? I am looking at an LLC with two partners. Their capital account balances and basis are equal at 50k. Partner A is selling his interest to Partner B for 200k. They want to close the books at 12/31/12 so I think I need to make an entry zero Partner A's capital account balance and set up a note payable. What is the other side of the entry? I've read that I should reduce Partner B's capital account by the difference but then he would have a large negative capital account. Does this look correct? Here's what I think
Dr. Partner A Capital Account $50,000
Dr. Partner B Capital Account $150,000
Cr. Note Payable to Partner A $200,000
Does anyone know the tax implications of the Note Payable? It's going to be paid off in 2 installments. Would this be a capital gain to Partner A for $150,000? This looks like a non-deductible non-taxable event for Partner B and the LLC.
Also, the LLC is set up in CA but the remaining partner will be a single-member LLC and lives in MA. What's the easiest way to move the LLC to MA?
Thank you very much for your help!
Can someone give me advice on whether or not I'm recording the sale of a partnership interest correctly? I am looking at an LLC with two partners. Their capital account balances and basis are equal at 50k. Partner A is selling his interest to Partner B for 200k. They want to close the books at 12/31/12 so I think I need to make an entry zero Partner A's capital account balance and set up a note payable. What is the other side of the entry? I've read that I should reduce Partner B's capital account by the difference but then he would have a large negative capital account. Does this look correct? Here's what I think
Dr. Partner A Capital Account $50,000
Dr. Partner B Capital Account $150,000
Cr. Note Payable to Partner A $200,000
Does anyone know the tax implications of the Note Payable? It's going to be paid off in 2 installments. Would this be a capital gain to Partner A for $150,000? This looks like a non-deductible non-taxable event for Partner B and the LLC.
Also, the LLC is set up in CA but the remaining partner will be a single-member LLC and lives in MA. What's the easiest way to move the LLC to MA?
Thank you very much for your help!
