- posted 10 years ago
Newbie alert: I don't have a background in accounting.
That being said, here's a quick summary of the back-story: There are three beneficiaries to a land-rich, but cash-poor estate. The estate was unable to raise the cash without selling its land assets, so one of the beneficiaries paid the estate's remaining debts to the tune of ~$65,000. This allowed the estate to close and the land to be distributed to the three beneficiaries. An LLC was then created with the three beneficiaries as members, each contributing the inherited land to the LLC. A mortgage was drawn up, backed by the LLC's new land assets so that the funding beneficiary/member would be paid back with interest.
The problem is in accounting for this in the LLC's books: The beneficiary paid the estate's debts directly. The money did not flow through the LLC because the LLC didn't exist at the time, but the LLC is still responsible for paying this mortgage. How should I set this up in Quick Books? The land was contributed by the LLC members and has become the LLC's asset. The value of the land is the members' equity. But there is nothing really to show for the mortgage. The result is almost as if the LLC is paying for an asset that it doesn't receive. It's not as if the LLC used the proceeds from the mortgage to buy the land from the member or to pay expenses...
Any thoughts on this scenario would be greatly appreciated!