Sale from Single Member LLC to another Single Member LLC

[equinecpa]

I do a return for a husband and wife who each have their own single member LLC which goes on the 1040.

The wife sold an asset to the husband this year. Would this be a disregarded transaction, or is it OK to record the sale (at a gain) in the wife's business and record the purchase in the husbands?

They keep all of their banking separate so this is a real transaction at fair market value. I just don't know if it is allowed for tax purposes.

Carolyn

[Bill Tubbs]

related party - gain

Generally the IRS doesn't allow LOSSes when parties are related, but I see no problem with recognizing a gain like this.

Bill

[Bees Knees]

A married filing joint return is considered to be one taxpayer. Spouses with separate Schedule C businesses (disregarded single member LLCs) could be considered one taxpayer if tax avoidance is an issue. For example, if one spouse sells a fully depreciated piece of equipment to the other, the gain is taxable but not subject to SE tax. The other spouse then could take Section 179 and reduce SE tax. The next year, the new owner could sell the asset back to the other spouse and do the same thing.

That would be considered a tax avoidance scheme. The IRS could look through the transaction and disregard it for tax purposes.