OMG I didn't see this while typing my LOOOOOONG post. 

so what? A disregarded entity can issue a K1. How else would I put the income and other info on LLC B's return? 

I guess I was more like chasing my tail more than barking up the wrong tree.

First, when you have a SMLLC disregarded entity, report the SMLLC's tax thingies on the SINGLE MEMBER's tax return.  Thus, a SMLLC running a hot dog stand?  Report the activities on the SM's Schedule C.  THUS, "disregarded".  Likewise, another disregarded entity:  An investment account held by a living trust?  Report the income etc on the GRANTOR's tax return.... This is what DISREGARDED is about.

 Since you made the above statement, I guess there is a "Scenario III" branched out of the fact patterns and convoluted convolutions. 

Lisa....  Lisa.... wait for me!!!