A member sells their interest in a three-member LLC partnership to a new member outside of the LLC. The selling member loaned fund to the LLC. Is the loan taxable as canceled debt as the selling member is not looking for repayment?

Forum|Forum|3 years ago
February 8, 2023
2 replies
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ProConnect Tax

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Best answer by IRonMaN

Yes he did inform them of cancelling the debt. My apologies

Then you have debt forgiveness income.

IRonMaN

Level 15

If he doesn’t want it back was it a loan or equity?

Slava Ukraini!

A

AzzurriTAuthor

Level 3

It was a loan. He sold his equity to an outside member

IRonMaN

Level 15

Did he formally notify the partnership that he was forgiving the debt? Does the partnership really want to pick up income for forgiveness of debt or does it and the former partner wish to convert it to equity?

Slava Ukraini!

qbteachmt

Level 15

What does the sale have to do with the debt? You included all of that as if they apply to each other. Does the buyer think they got the debt position in the purchase?

Don't yell at us; we're volunteers

A

AzzurriTAuthor

Level 3

The question was asked on how to handle the outstanding debt that the selling partner held. When they sold their interest, they are not seeking repayment. I was asking to see if there were other options besides debt forgiveness income.

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