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Old 07-19-2018, 12:16 PM
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Join Date: Jul 2018
Posts: 1
membership interest sale

Dear Sir

Greetings to you and wish you well

May i seek your comment on the case below .

ABC LLC ( file Tax return form 1065 ) has 3 members, ABC LLC only asset is a piece of vacant land .

ABC LLC -Equity as of 12/31/2017:

Member A has 1,000 LLC UNITS
Initital Capital $1,000.00

Allocated Earnings -200.00

Member A Equity= 800.00

Member B has 2500 LLC UNITS ,
Initital Capital $2,500.00

Allocated Earnings -500

Member B Equity= 2,000.00

Member C has 4500 LLC UNITS .
Initital Capital $ 4,500.00

Allocated Earnings -500.00

Member C Equity =$4,000.00

In 2018, Member B wants to sell his total 2,500 LLC units ( sell membership interest ) to a new party ,outsider , which is D.

How would we resolve the negative balance of B's allocated earnings that resulted from the previous years' losses?

How would the accounting transaction like ? does the below accounting journal correct ?

Debit Capital B $2500

Credit Capital D $2500

Debit earning D $500
Credit earnings B $2500

Or can Member B put in cash $500 back to ABC LLC to make the earning zero before selling his membership to D ?
If Member B put in $500 into ABC LLC, should the journal entries be
Debit Bank /cash $500
Credit Earnings B $500

Must all other members ( A &C) also put in money equal to their negative earnings to make their earnings ZERO before B sold her membership to D.

Appreciate your help and thanking you in anticipation

Kind thoughts
Leena



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Old 07-20-2018, 03:32 AM
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Join Date: Oct 2010
Posts: 5,139
Quote:
Originally Posted by [email protected] View Post
Dear Sir

Greetings to you and wish you well

May i seek your comment on the case below .

ABC LLC ( file Tax return form 1065 ) has 3 members, ABC LLC only asset is a piece of vacant land .

ABC LLC -Equity as of 12/31/2017:

Member A has 1,000 LLC UNITS
Initital Capital $1,000.00

Allocated Earnings -200.00

Member A Equity= 800.00

Member B has 2500 LLC UNITS ,
Initital Capital $2,500.00

Allocated Earnings -500

Member B Equity= 2,000.00

Member C has 4500 LLC UNITS .
Initital Capital $ 4,500.00

Allocated Earnings -500.00

Member C Equity =$4,000.00

In 2018, Member B wants to sell his total 2,500 LLC units ( sell membership interest ) to a new party ,outsider , which is D.

How would we resolve the negative balance of B's allocated earnings that resulted from the previous years' losses?

How would the accounting transaction like ? does the below accounting journal correct ?

Debit Capital B $2500

Credit Capital D $2500

Debit earning D $500
Credit earnings B $2500

Or can Member B put in cash $500 back to ABC LLC to make the earning zero before selling his membership to D ?
If Member B put in $500 into ABC LLC, should the journal entries be
Debit Bank /cash $500
Credit Earnings B $500

Must all other members ( A &C) also put in money equal to their negative earnings to make their earnings ZERO before B sold her membership to D.

Appreciate your help and thanking you in anticipation

Kind thoughts
Leena
for more accurate financial analysis ,i guess you need to meet face to face a tax pro,i.e., an IRS Enrolled Agent/a CPA doing taxes in your local area for your accurate fed/state returns.



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