I was an active partner in an LLC with a 25% ownership interest. The
LLC never showed a profit over the last four years and each LLC member
showed a negative capital account on our K-1 forms.

Each year, when filing personal taxes, I took the maximum write-off
amount, which resulted in no federal or state income taxes due, based
on the losses of the LLC.

On 1/1/05, I resigned from the company due to accounting
irregularities and my final K-1 form reflected roughly a $500,000
negative capital account.

My question is this: is there any method to offset or postpone some or
all of this negative capital account to avoid having to pay capital
gains on the $500,000?

I have been informed by my accountant that I will have to pay full
capital gains on the amount on my 2005 taxes due to my resignation
from the LLC. My accountant says that since I no longer have ownership
in the LLC, I have to reclaim what the IRS considers "phantom income".

I have interests in several other businesses, one an LLC, on an
S-corp, one a C-corp. Not sure if any of the negative capital gain
could be transferred to one of those entities, or any other ways to
mitigate this large potential IRS bill.

Hi,

I have the solution to ur problem.

Message me back so i can get u the answer.

rgrds,
bruice.

Hello,

Any information you can provide would be appreciated.

Thanks,
Pompie

I am also interested in the answer to this.