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QUESTION DETAIL
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One of the three partners in a multi-member LLC which is taxed as a partnership passed away this year. He had outstanding debts due to the company and we're wondering how we should treat this scenario for book and tax purposes?
ANSWER
Expert Neda Tafreshi's Answer:
His death will not eliminate the debt to the partnership. If he has no capital left, his debt should be divided between the remaining partners based on the original partnership agreement. Therefore, the remaining partners will carry the debt of the deceased partner. For book and tax purposes, the deceased partner's debt will be transferred by a debit to his capital account and credit to remaining partner's capital.
