AK wrote:

- quote -

I'm not sure that would apply here. A taxpayer who receives
a 1099MISC can know that they were never paid and therefore
it is reasonable to ask the IRS to go beyond a 1099. As
well, the backup for these payments would generally be
relatively simple--copies of checks and payments to the
taxpayer

However, someone receiving a K-1 from a partnership doesn't
have that same knowledge--the question is whether income was
properly computed at the partnership level and whether the
taxpayer's interest was properly computed.

Note that a state court most likely *would* decide the
partner did have certain rights to an accounting. But I
strongly doubt that the Tax Court would decide that every
partner has a right to require a full blown IRS exam of any
passthrough entity.

--
Ed Zollars, CPA
Phoenix, Arizona

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"Ed Zollars, CPA" <ezollar[at]mindspring.com> wrote:

- quote -

.....

That sounds like another situation where someone gets a tax
bill (the K1 in this case) without the right to see what
factual basis is behind the claim. File a form 8275 with IRS
explaining that the K1 may not be factual and since there
was no distribution, the "income" will not be reported until
some real proof of income is shown. IRS needs to work on
1099s and K1s being sent out in situations where there are
no actual distributions and the companies fail to provide
proof of the supposed income.

ak

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Cheryl wrote:

- quote -

Unless she formally withdrew from the LLC, the profits are
her share , plus the associated taxes.

However I think a lawyer would say she has a cause of action
against her former hubby. She certainly DOES have a right
to see the books, in fact, the usual operating agreement of
the LLC should specify this. She does have a copy of the
operating agreement, doesn't she?

ChEAr$,
Harlan Lunsford

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- quote -

Have her contact the attorney who handled the divorce. The
LLC should have been covered in the filing.

Bruce Raskin, CPA
Small Business and Individual Tax and Accounting Services

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"Cheryl" <cherylfdgm[at]yahoo.com> wrote:

- quote -

Get an attorney to force the issue. If the numbers are
accurate, she pays the tax. Whether she received cash has
nothing to do with her reporting her share of LLC income.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Cheryl wrote:

- quote -

Well, the problem is that the result is perfectly possible,
since as a partner she picks up her share of the income
whether or not it is distributed. It is just possible that
the operating agreement doesn't require pro-rata
distributions on an annual basis, so the "unwelcome partner"
could be frozen out.

In that case, the key issue will be to find out what options
she has under local law as a member of the LLC. I think the
key issue is to get to an attorney involved who can force
the issue a bit--it's very possible that she is facing a
"homebrew" strategy from her ex who is trying to use the tax
code.

If she has an attorney, see if the attorney is aware of the
problem and seems "up to speed" on the tax issues. They may
need to bring in both some tax expertise and someones
skilled in local LLC law to break this logjam.

--
Ed Zollars, CPA
Phoenix, Arizona

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- quote -

Has she consulted her divorce attorney??? Probably that
would be the best way to handle it.

Immediately, she can request additional time in order for
her to file a complete and accurate return. To apply for
an additional extension either write a letter to the IRS or
file Form 2688 (PDF), Application for Additional Extension
of Time To File U.S. Individual Income Tax Return.

If one is issued a Bogus K-1, I'd suggest that it could be
fraud. If you are certain that is the case, and you believe
someone is violating federal tax laws, you should contact
the IRS at (800) 829-0433, the Criminal Investigation
Hotline. If you prefer, you can provide your information in
writing to the Criminal Investigation Branch at the service
center where you file your return. Refer to your tax package
for the address of your service center. Although you are not
required to identify yourself, it is helpful to do so. Your
identity will be kept confidential. You may also be entitled
to a reward.

Of course, if there is anything in your prior returns which
could jeopardize your position, I'd be very careful before
going there. Again, engaging the services of an attorney is
likely best.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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A friend of mine separated from her husband (now divorced)
at the end of 2003. They were members (2 of 3 or 4) in a
small LLC. She never rec'd any money from the business
during the year but rec'd a K-1 for her share of the
profits. He will not talk to her or let her see the books
or the entire tax return. She filed an extension for this
year until she can figure out what to do. She cannot afford
the taxes. What are her options?

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