LLC members

[JON]

are filing as a partnership. Is there a basis limitation on loses??? Is there a limitation on liabilites assigned recourse or nonrecourse???

[oceanlovin'ea]

I'm going through this situation now. A new partnership formed in fall of last year. Not a lot of income and more expenses.

They can take the loss up to their basis in the partnership. In my case, partners put very little capital in the partnership so they are very limited. You can add liabilities assumed to their contributions to the partnership. That will increase their basis.

Others may have more to add.

Linda

[JON]

I agree

with you, but in my case I think they are going to go under and the partners to. Very sad for the partners both of whom had sold out of other businesses and should have gone golfing, but did their "dream" (nightmare) instead.

Bank went with them, credit card went with them.

[Bees Knees]

An LLC is not automatically limited as to liabilities. Very few lending institutions will lend money or extend credit without one of the partner's putting their personal guarantee on the liability.

The problem with LLCs, is that sometimes it may only be one of the LLC members that actually signs the loan documents and is personally liable for the debt. In that case, one member could be at-risk for the debt while the other member, being a limited liability member, is not at-risk. Thus, one member may have basis and be able to deduct losses, while the other member does not have basis in the losses.

It all depends on whether the member is personally liable for the debt. I always ask the LLC member whether he/she personally signed any of the loan documents and is liable for the debt should the LLC go under.