First time dealing with Partnership redemption as follows:
3 member LLC - one partner - call him J - leaving via a redemption of his interest for $400k, with $100k down, $300k note payable over 3 years. Income has been allocated up to the date of redemption (05/31).
Partnership has no receivables and inventory of $75k but the FMV of it does not exceed it's tax basis by 120%. Tax basis in the inventory is $65k. Partnership does have some LHI on the books as well.
Questions:
For the $300k note, should it be DR remaining partners Capital and CR Note payable? The down payment was posted to J capital account.
Do we need to do a step up since no hot assets? If so, when does step happen? This year or when totally paid out?
If after allocating the income up to the date of redemption, the leaving partner (J) still has a capital account balance, what happens to it? Allocated to remaining partners to zero out?