Don't forget to update your operating agreement! When I sold half of my LLC that owned investment properties, I was so focused on the tax implications that I nearly overlooked updating the operating agreement to reflect the new ownership structure. This is especially important when dealing with debt because you want clarity on who's responsible for what if things go south.

Great question Diego! I went through almost the exact same situation about 18 months ago with my LLC that owned a warehouse property. The key thing to understand is that you're selling an ownership interest in the entity, not transferring debt directly to the new partner. Since your personal guarantee with the bank remains unchanged, there's no debt forgiveness event for tax purposes. The LLC's debt obligations stay with the LLC - they don't disappear or get "forgiven" just because ownership changes. What you're essentially doing is selling half of your equity position while maintaining your full personal liability to the lender. For tax purposes, you'll need to calculate your basis in the 50% interest you're selling (including your share of the LLC's liabilities) and compare that to the $75k you're receiving to determine if you have a capital gain or loss. The fact that you'll have a smaller percentage share of the LLC's future profits doesn't create a taxable debt forgiveness event. I'd definitely recommend getting this documented properly though - both for your records and to make sure the IRS understands the structure if they ever ask questions. The 26 CFR 1.1001-3 regulation you mentioned is on the right track, but since you're not modifying the original loan terms or your guarantee, it shouldn't apply to create a taxable event.

This thread has been incredibly helpful! I'm in a very similar situation - divorced in 2015, modified the agreement in 2024 with no mention of tax implications. After reading everyone's experiences, I feel much more confident about continuing to take the deduction. What really stands out to me is how consistent everyone's advice has been: if the modification doesn't explicitly state that the new tax rules apply, then the original pre-2019 treatment continues. The IRS seems to have written this rule pretty clearly - they require express language, not implied or assumed changes. For anyone else in this situation, I'd recommend: 1. Keep copies of both your original divorce decree AND the modification 2. Make sure your ex-spouse understands they still need to report the payments as income 3. Consider adding protective language to any future modifications (like @Rudy Cenizo suggested) 4. Keep detailed records of all payments It's frustrating that the IRS publications aren't clearer about this, but based on everyone's real-world experiences here, it seems like we're interpreting the law correctly. Thanks to everyone who shared their stories - it's so much more helpful than trying to decode tax publications alone!

This entire discussion has been so valuable! As someone who went through a similar situation with a 2014 divorce agreement modified in 2023, I can confirm that the consensus here is absolutely correct. The key really is whether your modification contains explicit language about adopting the new tax rules. What I'd add from my experience is that it's worth having a conversation with your ex-spouse about this before tax season to make sure you're both on the same page. In my case, my ex had heard from friends that "alimony isn't taxable anymore" and stopped reporting it as income in 2023. This created a mismatch that could have triggered issues for both of us. I had to show them the actual tax code and explain that for our pre-2019 agreement (even with modifications), the old rules still apply unless specifically changed. Now we both file consistently - I deduct, they report as income - and everything works smoothly. The bottom line for anyone in this situation: silence in your modification is your friend, but communication with your ex-spouse is essential to avoid filing inconsistencies that draw IRS attention.

Just got my amended return processed after 4 months. Had to call my congressman to help push it through tho. Might wanna try that route if it goes past 16 weeks tbh

I went through this exact same situation last year - 810 freeze in March, amended return filed in May. Mine actually took about 20 weeks total, but I saw movement on my transcript around week 14 with code updates. The key is watching for any new transaction codes to appear. Also, don't panic about the "Return Not Present" message - that's normal during the amendment review process. The IRS basically puts your original return in limbo while they work on the amended version. Keep checking your transcripts weekly and if you hit the 20-week mark with zero movement, definitely consider the congressional route mentioned above.

I am so deeply sorry for your loss, PaulineW. What you and your family are going through is heartbreaking beyond words, and please know that asking these practical questions doesn't diminish your grief or love for your son - it shows you're being responsible during an impossible time. Everyone here has given you excellent advice about the Child Tax Credit, and I want to emphasize that you absolutely qualify. Your son's life, however brief, matters and the tax code recognizes this. The IRS considers any child born alive during the tax year as eligible for the Child Tax Credit, regardless of how long they lived. I wanted to add a few additional points that might help: 1. When you apply for the posthumous Social Security Number, you can also request expedited processing by explaining your circumstances. The SSA sometimes prioritizes these cases, especially when tax deadlines are involved. 2. Consider speaking with a tax professional who has experience with these sensitive situations. Many CPAs and tax preparers have dealt with similar cases and can guide you through the process with the compassion and expertise you need. 3. If you had pregnancy complications or your son required any medical care during his brief life, all of those expenses can potentially be included in your medical deductions along with your ongoing grief counseling costs. Please take care of yourself first. The financial matters will work out, but your healing is the priority. Your son's brief presence in this world was meaningful, and claiming these benefits is simply part of honoring his life and taking care of your family during this difficult time.

I am so deeply sorry for your loss, PaulineW. Losing a child is an unimaginable tragedy, and my heart goes out to you and your family during this devastating time. I wanted to share something that might provide some immediate relief for your financial stress. Many people don't realize that if you're temporarily unable to work due to grief and trauma (which is completely understandable), you may qualify for short-term disability benefits through your employer or state programs. Some states also have temporary family leave programs that provide partial income replacement during times like this. Additionally, I'd encourage you to look into local religious organizations, community foundations, and nonprofit groups in your area - many have emergency assistance funds specifically for families facing infant loss. These funds can sometimes help with immediate expenses like medical bills, therapy costs, or basic living expenses while you take time to heal. Regarding the tax situation, everyone here has given you excellent advice about the Child Tax Credit. Your son's brief life absolutely qualifies him for this benefit, and claiming it is not something to feel guilty about - it's recognition that his life mattered, no matter how short. Please don't rush yourself through any of this. These benefits and assistance programs will still be available when you feel ready to pursue them. Right now, focus on taking care of yourself and allowing yourself to grieve. You're being incredibly strong by even thinking about these practical matters during such a difficult time. Your son's life had meaning and value, and honoring that includes making sure you and your family are taken care of during this impossible period.

This is exactly the kind of detailed breakdown I was looking for! Thank you @Kingston Bellamy for the specific thresholds. Based on what you've shared, it sounds like I really only need to worry about Louisiana and New Mexico from my list, and even then the enforcement risk seems minimal for such small amounts. I think I'm going to take the practical approach and file in Louisiana and New Mexico just to be safe (since they seem to be the most strict), but skip Ohio, Oklahoma, and Pennsylvania since I'm clearly below their thresholds. One follow-up question - do you know if these state thresholds get updated regularly? I want to make sure I'm working with current information before making my final decision.

Just wanted to chime in as someone who's been through the MLP tax nightmare multiple times. The advice here is solid, but I'd add one more consideration: if you're planning to invest in MLPs again in the future, it might be worth establishing a filing pattern now even for small amounts. Some states have "lookback" provisions where if you file in one year, they expect you to file in subsequent years even if your income drops below thresholds. This is particularly true for Louisiana and New Mexico. If this was truly a one-time mistake and you're never touching MLPs again, then the practical approach of only filing where enforcement is likely makes sense. But if there's any chance you might end up with MLP income again, consider whether starting a filing relationship with these states now is worth the hassle to avoid complications later. Also, since you mentioned the tax due would be $0 in all states anyway, you might want to check if any of these states charge filing fees for nonresident returns. Some states have minimum fees (usually $25-50) even when no tax is owed, which could make the "file everywhere to be safe" approach more expensive than you'd expect.