balance sheet for new member in an existing llc

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#1
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5-Jan-2015 4:01pm
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Seattle
my client sold their 100% membership interest in an LLC which had 4 partners. The transfer of the partnership interests terminated the partnership. The partnership continues however with a single new owner who has elected S status. When the old partnership closed which was on the cash basis, I accounted for the hot assets and included in the final balance sheet the accounts receivable, accounts payable, inventory. the transfer of the interest involved a transfer of the partnership debts.

My client purchased the a/r, a/p etc. My issue is how to book these assets and reflect them, if at all on the opening balance sheet of the new entity (s corp). the hot assets under IRC 751A have been recorded and reflected as part of the initial investment. the debts assumed increase the basis of the incoming partner, I don't know how this would be booked. If I credit the accounts payable, where is the debit? The previous owners took the tax benefit of the accounts payable. do I record the accounts payable at all? The new entity is paying the bills.

thank you.
 

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