An individual died and owed a lot of money in farm debt. The children (beneficiaries) set up a LLLP for the farm rent that would be income and to pay back the debt owed at the date of death. The lawyer that set up the LLLP said the beneficiaries won't pay any tax on their share of the rent income until all the debt is paid back. Is this true? How does the LLLP handle the rent income and the debt payments?
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Not sure it makes sense
They will have to count the income from the rent. They can take valid expenses. But how can they not pay any tax on it until the debt is paid off? If they were only receiving enough money to pay the interest / taxes / etc then they would have no profit to pay off the principal.Originally posted by tonia2021 View Post
I look forward to some of the smarter minds to post on this.
Dusty -
Don't know how large the estate is but the attorney may have been referring to Federal and/or State estate tax potential.......not income tax potential.Originally posted by tonia2021 View PostComment
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In the original post it seemed clear that the lawyer was referring to income tax.Originally posted by jimmcg View Post
I suspect there is miscommunication or a misunderstanding here. The existence of debt, whether it is paid or not, does not change the fundamental rules requiring the reporting of and paying tax on income.Roland Slugg
"I do what I can."Comment
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