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Does the IRS consider this a distribution?

Steve F
Level 1

Hello Quickbooks Community,

Please help with a question.

Does the IRS consider this a distribution?

Our partnership LLC had a large amount of retained earnings. It was decided to distribute the money to the members in proportion to percentage ownerships. However, all members wanted to leave their newfound wealth in the LLC. So, the money was simply debited from the retained earnings account and credited to the member’s Capital Accounts. No money left the LLC.

Does the IRS consider it a distribution?

Thank you for your help,

Steve F.

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3 Replies 3
sjrcpa
Level 15

Partnerships don't have retained earnings. They have capital. So undistributed prior earnings are already in the partners' capital accounts.


ex-AllStar
qbteachmt
Level 15

I would like to point out, you seem to be lost on the internet.

You’ve come to a Peer User community for Intuit Tax Preparation products supporting Lacerte, ProSeries, or ProConnect Tax Online products. Please visit the QuickBooks Help site for the answer to your question.

For your Accounting question, you stated it as if you are an S Corporation, and not as an LLC. You also pointed out nothing got distributed. There is no Change in Equity.

You need to sit with your own CPA or tax advisor or whoever helped you with your formation documents, and discuss this financial management issue with that person.

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"Level Up" is a gaming function, not a real life function.
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qbteachmt
Level 15

I forgot to point out to @Steve F  this exact same username you used here, the same as your Intuit ID, is also what you use at the QB Community.

You happened upon another of Intuit's communities, so your username worked here. Your question doesn't really pertain to this community, however.

Good luck.

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"Level Up" is a gaming function, not a real life function.
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