A previous employer sent me a K-1 showing about $2000 in income (I own a tiny percentage of the company). I haven't worked there in 5 years, and I know I will never see a dime from this company ever again. Is it legitimate for me to be taxed on money I will never see? Should I pursue selling the stock back to them? Thanks in advance.
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You are required to include in your taxable income your percentage of the income from a a flow thru entity as well as any other passthrough items, whether distributed or not. ___________________________________
-----> real address on hobokeni or hobokenx
"Jared" wrote
Yes, it's income to you, and yes it's taxable even though you haven't "seen" the money. The profits you are taxed on adds to your basis in the company. Yes, you should look into selling the shares to someone (probably your cheapest "out"). If necessary get an attorney involved to protect your interests. When you sell the shares you own, you can claim a gain or loss on those shares based on your tax basis. So while you have to include that as income today, you will get some amount of "loss" in a future year.
-- Paul Thomas, CPA snipped-for-privacy@bellsouth.net
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