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Who prepares LLC TRs after creditor takes interests.

Technical topics regarding tax preparation.
#1
Nilodop  
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Relatively simple facts. MMLLC has filed through 2017 as S corporation. SMLLC is a disregarded entity and therefore filed on owner's Schedule C through 2017. Individual who owned majority of MMLLC and all of SMLLC is discharged in a Chapter 7 Bankruptcy in 2019. Major creditor Bank takes over both LLCs (interests in and assets of which were collateral for loans to the individual owner.)

Logically, wouldn't the bank have to file the S corp return and also provide info for filing the Schedule C for 2018? The individual has no access to the records. The bank is unresponsive to his calls.

I saw this recent thread viewtopic.php?f=8&t=15460&p=138776&hilit=bankruptcy#p138776 with this comment at the end of it. Another side note: If the case was converted to Chapter 7, a trustee would be appointed. In such a case, the IRS takes the position that the trustee should file the Form 1065 returns for periods during bankruptcy -- even though, as some legal commentators have noted, there is nothing in the Internal Revenue Code or the Treasury regs that expressly imposes such a duty on the bankruptcy trustee. Is there research behind it?
 

#2
LW25  
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Nilodop wrote:I saw this recent thread viewtopic.php?f=8&t=15460&p=138776&hilit=bankruptcy#p138776 with this comment at the end of it. Another side note: If the case was converted to Chapter 7, a trustee would be appointed. In such a case, the IRS takes the position that the trustee should file the Form 1065 returns for periods during bankruptcy -- even though, as some legal commentators have noted, there is nothing in the Internal Revenue Code or the Treasury regs that expressly imposes such a duty on the bankruptcy trustee. Is there research behind it?


If you're asking whether the IRS has done some research that backs up the IRS position that a Chapter 7 trustee of a partnership should file the Form 1065 return for the partnership, I don't know whether the IRS has done any research on that. The only support for the IRS position of which I am aware is the committee report for the Bankruptcy Tax Act of 1980. The problem was that the Congress failed to put the applicable specific language in the law itself. I'm not aware of any case where a Federal court actually ruled on that narrow point.
 

#3
Nilodop  
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The individual can. with a preparer's help, file a 2018 return even w/o getting the K-1 for the MMLLC and the numbers for the SMLLC. Accounting is great that way. Estimates would be involved and disclosed, and the final result (amount of tax he has to pay or refund he gets) will be very close to accurate. And the 2019 return will make up for whatever minor differences turn out to be present.

But who gets penalized for the failure to file, or failure to file timely, the 1120S?
 

#4
jon  
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Am I missing something? Trustees are responsible to do filings once pushed to that point. Is it not unusual S corp stock owners could have income on liquidation. If they have loss carryforwards to cover can be the question, or they too file bankruptcy...
 

#5
Nilodop  
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Am I missing something? Trustees are responsible to do filings once pushed to that point.. The LLCs did not go into bankruptcy, just the individual.
 

#6
jon  
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Are filings not XYZ, LLC and Mr Blah as surety for? Do you have to wait for the member to file without mention of LLC even if a partnership or corporation status has been made?
 

#7
Nilodop  
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I don't understand that post.
 

#8
Nilodop  
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Bump. I'm still confused. Am I looking at the answer and not seeing it?
 

#9
Nilodop  
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Major creditor/bank takes over both LLCs (interests in and assets of which were collateral for loans to the individual owner.). I said that in OP. It was my assumption that the bank/major creditor took not only the remaing assets of the LLCs, but also their members' interests. Maybe that's a wrong assumption on my part. So maybe the members still own the interests and have the filing requirement. Does anyone know the answer?
 


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