After two weeks of discussing Revenue Ruling 99-6 — which governs the tax consequences resulting from the conversion of a multi-member partnership into a single-member LLC disregarded as separate from its owners — we turn our attention today to its sister authority, Revenue Ruling 99-5.
Revenue Ruling 99-5 addresses the opposite situation, providing the tax consequences of a single-member LLC taking on another partner, converting the SMLLC into a multi-member LLC.
Like Revenue Ruling 99-6, Revenue Ruling 99-5 provides two alternative fact patterns. Today we address Situation 1, in which a new partner purchases a portion of the SMLLC interest from the sole owner. Enjoy.