QB question

[oceanlovin'ea]

I have a partnership LLC. Has one rental condo in it. Client did a loan modification with bank that hold mortgage in 2010. The issued 1099C.

In QB when I reduce the balance on the loan, what account would I make the other side of the entry to?

The asset is sitting there with a value or basis of what they paid but value has gone down half. So I wondered if that was what I make the offseting entry for.

Thanks so much.

Linda, EA

[Maribeth]

I have a partnership LLC. Has one rental condo in it. Client did a loan modification with bank that hold mortgage in 2010. The issued 1099C.

In QB when I reduce the balance on the loan, what account would I make the other side of the entry to?

The asset is sitting there with a value or basis of what they paid but value has gone down half. So I wondered if that was what I make the offseting entry for.

Thanks so much.

Linda, EA

If the seller held the contract and reduced the amount due, then you would reduce the basis of the property.

Since you indicate that the bank made the loan modification, that is not the original seller so you cannot reduce basis.

The entry you will make is to a revenue account called "cancellation of debt".

Maribeth

[oceanlovin'ea]

Condo was purchased new about 3 years ago and this is the original mortgage. There is also a second mortgage.

I understand the account COD as revenue. a 1099C was issued in the name of Partner A.

LLC has 2 partners, partner A and partner B. Condo is in the name of both partners. Loan is in the name of partner A. Nothing is actually in the name of the LLC.

So the CPA that does the personal return of partner A says he will use the COD on their personal return since it is in the name of partner A. I can see why....COD doesn't affect partner B.

So the balance sheet of the LLC will have a revenue account with the amount of the loan modification. Will that show up on the income and expense statement (P&L)?

Linda, EA

[Maribeth]

So the balance sheet of the LLC will have a revenue account with the amount of the loan modification. Will that show up on the income and expense statement (P&L)?

Linda, EA

Yes, the COD income will show up on the income statement of the partnership. Since the partners have an agreement as to who gets the income, the COD income will be shown separately on the K-1 and apportioned 100% to Partner A.

[oceanlovin'ea]

Thanks so much for your help. Now to tell the client that I need the amount that is on the 1099-C to put on the partnership return. That should prove interesting.

Linda, EA

[oceanlovin'ea]

Cpa

CPA doesn't want to do it that way. So she is paying me for what i have done and he will do the tax return for the LLC and their personal. He has been doing their personal for several years now anyway.

That works for me. If I can't do it right, I don't want to do it.

Linda, EA

[AZ-Tax]

Why 11020s vs 1065?

I think I may know the answer but I am curious. I have a client (husband and wife) in a 2 member LLC and they file a form 1065. When I acquired them as clients, the 1065 was already in place. My client AGI from other income is so high he cannot partake in the losses and if the S-corp loss passed thru to my client form 1040, same situation on not partaking in the loss due to high AGI. If that is the case, why the expensive S-Corp with the balance sheet etc.

[Maribeth]

CPA doesn't want to do it that way. So she is paying me for what i have done and he will do the tax return for the LLC and their personal. He has been doing their personal for several years now anyway.

That works for me. If I can't do it right, I don't want to do it.

Linda, EA

Now I am puzzled. With the fact circumstances that you gave, that is the way that the return should be done. What does the CPA know differently??

Maribeth

[oceanlovin'ea]

The loan is in the name of partner A, not the LLC. So he wants to put the 1099C on the personal return, not the partnership return. But the loan is for the property that is in the LLC.

I spoke with Beanna Whitlock about this. She is so knowledgeable about LLC's. She said if the property and the loan are not in the name of the LLC then it has no income or deductions. It is essentially a schedule E on the personal return.

I can't do a correct balance sheet on the partnership return if I can't make the entry to adjust the loan balance after the modification.

He has already done some things that are not kosher in my opinion. That is why he is doing their personal return now and not me.

Linda, EA

[BHoffman]

I wonder if the CPA is considering some sort of a basis adjustment election. I found this article:

http://www.allbusiness.com/government/public-finance-taxes-taxation/12343573-1.html

Didn't read the whole thing, though.

[Maribeth]

The loan is in the name of partner A, not the LLC. So he wants to put the 1099C on the personal return, not the partnership return. But the loan is for the property that is in the LLC.

I spoke with Beanna Whitlock about this. She is so knowledgeable about LLC's. She said if the property and the loan are not in the name of the LLC then it has no income or deductions. It is essentially a schedule E on the personal return.

I can't do a correct balance sheet on the partnership return if I can't make the entry to adjust the loan balance after the modification.

He has already done some things that are not kosher in my opinion. That is why he is doing their personal return now and not me.

Linda, EA

Hmmmm . . . . . . . . maybe you could make the entry directly into that partner's capital account. If the loan is in his name, then the loan should not have been booked on the LLC's books. So the entry to record the property on the books would have been a debit to property and a credit to his capital account. So . . . . . . . book the adjustment back to his capital account. Just a thought . . . . .

Maribeth