We Prepare Tax Returns!

We prepare most type of tax returns:


S Corporation.

C Corporation.




Pay Your CPA

Enter $ Below
Other Amount:
Your Email Address:

LLC CPA discusses Disguised Sales in Partnerships | Form 1065

In a Partnership LLC, Members pool their assets to increase profit. The IRS encourages this. So, a member doesn’t generally have gain or loss when contributing an asset to the LLC. Conversely, LLC distributions to a Member usually have no immediate tax consequences either. Why? Distributions generally return the partner’s capital or guaranteed payments. Note that exceptions exist. Consult with your LLC CPA. This post is a brief overview on a complex topic.

Contributions to the LLC

Note the gain or loss to the Member is deferred, not eliminated.

Disguised Sales

The name implies a devious plan by the Members to fool the IRS. But most times Members just fall into a trap. Members should proactively research transactions between the LLC and themselves. Planning can optimize tax consequences.

A disguised sale occurs when a Member contributes property to the LLC and receives a distribution back within a certain time frame. Several variations exist. These transactions, when considered separately, have deferred tax consequences. But this protection ceases when they’re considered together. And the IRS considers them linked under certain circumstances.

I’m a LLC CPA with a virtual office to accommodate clients outside my local Wilmington NC base. If you don’t have local LLC CPA, or like what you read on the website, consider calling (910) 399-2705 for a free phone consult.


Comments are closed.