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Old 06-22-2017, 05:28 PM
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Amend prior year K-1s = audit?

I am planning an exit from an LLC in which I am a partner. I am concerned that the proposed buyout arrangement might result in an unreasonable risk of audit to the LLC.

Briefly, the situation is as follows. The LLC was established to develop, market, and sell a product. One partner invested all the capital. Notwithstanding this, all partners have been allotted equal shares of profits, losses, and capital. The product has been in development over two years, and all there is is losses (the unfinished product is not carried on the books as a capital asset). Because of basis limitations, the losses allocated to me are without value until the LLC turns a profit. I wish to exit the LLC immediately, so I would never be able to claim them against future profit.

The proposed buyout arrangement is as follows. The K-1s for 2015 and 2016 would be amended. The losses assigned to me would be assigned instead to the partner who invested the capital. He would then purchase my share in the LLC for the tax offset value of the losses reassigned to him.

Because three years have not elapsed, the K-1s can be amended. Would doing this create an unreasonable risk of audit for the LLC?



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Old 07-03-2017, 05:29 AM
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Originally Posted by njwagner View Post
I am planning an exit from an LLC in which I am a partner. I am concerned that the proposed buyout arrangement might result in an unreasonable risk of audit to the LLC.

Briefly, the situation is as follows. The LLC was established to develop, market, and sell a product. One partner invested all the capital. Notwithstanding this, all partners have been allotted equal shares of profits, losses, and capital. The product has been in development over two years, and all there is is losses (the unfinished product is not carried on the books as a capital asset). Because of basis limitations, the losses allocated to me are without value until the LLC turns a profit. I wish to exit the LLC immediately, so I would never be able to claim them against future profit.

The proposed buyout arrangement is as follows. The K-1s for 2015 and 2016 would be amended. The losses assigned to me would be assigned instead to the partner who invested the capital. He would then purchase my share in the LLC for the tax offset value of the losses reassigned to him.

Because three years have not elapsed, the K-1s can be amended. Would doing this create an unreasonable risk of audit for the LLC?
Because three years have not elapsed, the K-1s can be amended. Would doing this create an unreasonable risk of audit for the LLC?==========>I GUESS possibly;
Filing an amended return does not necessarily increase the risk of a tax audit. Because the IRS does not disclose the standards and criteria it uses when selecting tax returns for audits there is no reason to believe that there is an amended return audit policy. However, the IRS might inspect a return that includes charitable donations that seem large for the income amount. This could be the case even if the return is not an amended return. accurate filing of the forms is important because the IRS matches income from Sch K-1 to other tax returns.



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