change in entity type

[oceanlovin'ea]

Client had to file as a partnership in 2014 because wife set up LLC with both of them on the LLC. They really just wanted to be sole proprietor. So at beginning of 2015 they took her off LLC and now it is SMLLC taxed as sole prop on Schedule C. That is the simple part.
He purchased a truck for use in his business in 2014 which LLC agreed to pay vehicle expenses. We took them as UPE. Now in 2015 he totaled the truck. Insurance didn't pay all they owed on truck. They have a casualty loss. But I am not sure where to put it. Because the vehicle expenses were taken on the Schedule E, does the casualty go on the schedule E? if not, where does it go?

Never had a situation like this before.....that seems to be happening to me several times this tax season already!!!!! Yikes!!!!!

Thank you

Linda, EA

[Gretel]

Linda, I am wondering why you would want to file a 1065 if this was a mistake (it would be different with a corporation). In my State there is no requirement to let them know if a SMLLC changes to a MMLLC or vise versa, you just make changes when filing your annual report. The legal entity never changed. I would mail the little form that comes with the EIN number back to the IRS and indicating that there was a mistake made and it is supposed to be a SMLLC. Of course it depends on what your State allows.

[taxea]

I agree with Gretel. Continue with two Sch C's and link the loss to his Sch C. You will have to allocate between business and personal on the loss form and I would do a separate form with the personal loss but only if it benefits the TP.

[oceanlovin'ea]

I thought that they HAD to file as a partnership if there were two people in the LLC.
I will do schedule C for him for 2015. So I would just do page 2 of form 4684 and then it goes to 4797 and front page of 1040?

Linda EA

[taxea]

not a married couple. They just have to file separate Sch Cs percent aged by the amount of work, income etc each is responsible for.