What used to be labelled as "Tax Matters Partner" is now called the "Partnership Representative". You need to do some research on this new designation so you understand how this works and the  responsibility that this individual has.  This individual does not have to be a member, BUT will receive all correspondence from the IRS AND this individual has sole authority to make decisions on behalf of the partnership. For starters, read the 1065 instructions describing this role and who is eligible. The correspondence you received is most likely a generic letter and just uses the terminology of member since it is an LLC.  Regardless of whether they are a member or not, this individual will receive all correspondence as noted previously.

I'm not sure your facts fall within the confines of Section 1033.   Based on the facts presented, you have a partial destruction and your gain is the result of a sale and not insurance proceeds. You should take a look at C.G. Willis v Commissioner.  Here the Tax Court found that the choice between sale and repair of the damaged vessel was based on the taxpayer's preference for the replacement vessel.   In this case, because the taxpayer in Willis was not forced to obtain replacement property, but only preferred it, the statutory requirement that property be “compulsorily or involuntarily” converted was not met, the court reasoned.  Your facts appear to be very similar and in order to obtain any deferral, you most likely need to meet the rules of Section 1031.

No argument that it is a short period.  However, it is for a short period related to the elected period of 10/1/2015 through 9/30/2016. If the taxpayer files another 2016 tax return, the total months for filing a 2016 return will exceed the 12 month rule of the noted regulation. It is doubtful that we will agree, but I am satisfied with my opinion that the original return was filed on a wrong year tax return.  Anything else, and 2016 will have more than 12 months of reporting.

While the short period may have only encompassed 2016, it was for the elected period 10/1/2015 thru 9/30/2016 since they were electing a fiscal period. As such, the return should have been filed on a 2015 tax return. 

I agree that you need to amend the initial tax return as that should have been filed on a 2015 tax return.  I would include a letter of explanation as this will clearly be confusing to the IRS. Regulation 1.441-1(a)(2) states that, except in instances related to a 52-53 week year (covered in 1.441-2), a taxable year may not cover a period of more than 12 calendar months.  If you would file another 2016 return, you would clearly exceed this 12 calendar month rule.  That unfortunately means amending the return. While the IRS letter may have indicated the due date of the return, which is correct, I would be surprised if the letter indicated that actual tax year of the form to use in your situation.  

@linette Not sure that response agrees with Oregon Statute 63.044 ? ORGANIZATION         63.044 Formation. One or more individuals 18 years of age or older or other entities may form a limited liability company by executing and delivering articles of organization to the office for filing. Organizers need not be members of the limited liability company. [1993 c.173 §14] I think the response is that it requires a call to the respective Secretary of State to understand the requirements.

While there may be sarcasm in the response, we don't make the rules.  Our role is to prepare the return in accordance with the code and regulations. In addition, not following a simple requirement like this can lead to additional scrutiny. The OP asked for help and it was provided.

While the facts are limited, the buyer and seller may be required to complete form 8594.  It is not unusual that a customer list can make up the majority of a trade or business; and most likely the only asset that has value. https://www.irs.gov/forms-pubs/about-form-8594

Additionally, if you are involved in preparing the tax return, distributions cannot cause the AAA to go negative. This means that distributions reported in AAA may not be the same as reported on the Schedule K-1.

See the attached links which addresses your question on short period Calif franchise tax: https://www.ftb.ca.gov/forms/misc/1060.html https://www.ftb.ca.gov/file/business/types/corporations/s-corporations.html        

I believe the point was that it is just "bonus depreciation" not "accelerated bonus depreciation".  The later term does not exist.   It may be 50 or 100 percent, but it is still referred to as bonus.  

You are confusing the issues here: The assets were sold at the entity level.  Any gain or loss is determined at the entity level.  The shareholder basis has nothing to do with this transaction. Based on your additional facts, since the intangible was purchased previously, you are able to use the $200,000 basis when determining your gain. Based on bullet 2, the split in the gain noted previously still applies; so this addresses your $2 mil. If you still have assets on the books after the transaction, then someone needs to determine what happens next; will the S corp remain and operate with those remaining assets or will the S corp be closed down? Depending on the decision to bullet 4, that will require an additional set of adjustments as it is not part of your initial question regarding the sale transaction. The piece that you are also probably missing is that the gain passes through to the shareholder, the shareholder pays tax, the shareholder should receive a distribution (current or liquidating depends on the response to bullet 4) to cover any tax AND the shareholder basis is increased by the gain passed through on the transaction.

In reading again, I do agree that I may have misread the original post; twice.  I read it as if the vehicle was owned in 2018 by the single member and this was a sole proprietor and now it is a corporation. Thanks for pointing that out.

Moving from a sole proprietor to a C corp tax free is accomplished under the provisions of Section 351. Section 179 is allowed for new and used and just to be clear here, while this may appear to be used property for the C corp, Section 179(d)(2) provides that property purchased from a related party is not eligible property. So just covering all bases here that even if the C corp "purchased" the property, it is not eligible as noted above.

Actually the property is not eligible to begin with as it was not acquired from an unrelated party which is one of the requirements under Section 179. Additionally, while used property is eligible, under Section 351, when contributed the holding period tacks, so this property contribution would not apply as it is really just a carryover from the sole proprietorship.

That is correct assuming those intangibles were part of the purchase price; which based on your facts appears to be the case. Purchase Price of $2 mil less $200,000 basis = $1.8 mil gain of which $600,000 is ordinary and $1.2 mil is capital gain

I believe you are misunderstanding the intent of the form 966. This form just tells the IRS that you have adopted a plan of liquidation.  It doesn't mean that it starts the timing of the final return. Liquidations are generally governed by Section 331 and 336.  Liquidations can take several years in some complicated situations.  Your time frame for the timing of your final tax return will be governed by the final liquidating distribution.  Keep in mind, that liquidating distributions are not reported on the K-1 as normal distributions.  They are reported on form 1099-DIV.