USA Sale of Partnership interest


Joined
Feb 5, 2013
Messages
2
Reaction score
0
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!
 
Ad

Advertisements

kirby

VIP Member
Joined
May 12, 2011
Messages
1,950
Reaction score
267
Country
United States
Remaining partner now has a negative capital. So entries not correct. Before sale total of partner capital = 100k but selling partner getting 200k so partnership is worth 400k. You need to book a goodwill asset.
 
Ad

Advertisements

Joined
Mar 19, 2012
Messages
45
Reaction score
3
Why are you booking the note payable as a partnership debt if, as you say, Partner A is selling to Partner B, not to the LLC?
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top