r/technicaltax

Hard to find anything online about this, so here it goes, I'm trying to figure out the tax implications to the buyer and seller in a scenario where:

1. Seller of CCPC corporation sold their common shares to step kids for 1M, the step kids are taking over the business
2. From the 1M, 0.7M is in promissory notes with remainder in cash
3. LCGE of 1M claimed by seller for the share sale
4. 5 years later, the 0.7M promissory notes are gifted back to the same corporation that issued the preferred shares

How would the 0.7M gifted notes be treated from a tax perspective by the original seller and the corporation that receives them in 5 years?

Edit: changed preferred shares to promissory notes

A Delaware LLC had two members from Jan 1, 2025 until June 2025. In June 2025, one member sold his full interest to the other member, so the LLC became a single-member LLC for the rest of 2025. No corporate tax election was made.

For federal tax purposes, should the LLC file a final Form 1065 ending on the date it became single-member, with K-1s issued through that date, and then report the remaining activity as a disregarded entity? Or should the Form 1065 cover the full 2025 tax year?

Also, for state purposes, should I expect the same split treatment, or does this depend entirely on the state? The LLC is registered in Delaware, but I’m trying to understand if there may also be state filing obligations depending on where the business had income, operations, nexus, or members.

I’m only trying to confirm the correct federal and possible state filing treatment before choosing software or hiring a preparer.

Does your firm care about Kwong v US. We are looking into the case heavily and can see a told between all years and clients having millions of dollars in refunds to file claims for, but we don’t know where to start. Has your firm decided a fee structure, we would likely not do a contingency fee but maybe a tiered flat rate structure, one to file the claim and one upon approval / receipt of refund. Any insight as to what you plan on doing would be helpful!

I hope someone has some experience with this.

Can't find good research on if the character of the disallowed loss changes between related parties.

In my example Related Party 1 (RP1) sold personal property to Related Party 2 (RP2). Loss would have been capital loss to RP1. RP2 sells the personal property for a gain. RP2 is in the business of selling this personal property.

Seems wild to think that the disallowed loss would change character, and reduce ordinary and S/E income, but can't find anything to confirm or deny.