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Partnership loss allocation

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Level 1

Two member LLC. No formalized agreement. One partner has funded the entirety of the capital where as the other one is more actively working in the daily operation. For the first year could I allocate the loss for the partnership completely to the partner that funded the beginning amount and then make it 50/50 for the rest of the years?

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Level 15

The partnership needs to make that decision. Discuss with them and get them to write a direction for you to use. 


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Level 15

The partnership needs to make that decision. Discuss with them and get them to write a direction for you to use. 


ex-AllStar

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Level 1
I understand they will need to make that final decision, but I was wondering if I could even give them that option to begin with?
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Level 8

If you work in exchange for 50% of a partnership equity interest, then you have taxable income, which is also subject to SE taxes.  That is the discussion you need to be having with the service partner.


Here is a pretty through review of the issues that go far beyond how to allocate the losses:


https://www.kirkland.com/-/media/publications/article/2002/03/compensating-the-service-partner-with-...

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