I'm surprised nobody has mentioned Form 8308 yet. When there's a sale or exchange of a partnership interest, the partnership has a filing requirement to report the transaction to the IRS using Form 8308 (Report of a Sale or Exchange of Certain Partnership Interests). This is required if there are Section 751 assets involved. Make sure the partnership's tax preparer is aware of this transaction so they can handle this reporting requirement correctly. I've seen partnerships miss this form, which can create problems later.

This is a really comprehensive discussion! I'm dealing with a similar situation right now and wanted to add one more consideration that might be relevant. If your client has been receiving guaranteed payments from the LLC (like for management services), make sure to clarify whether any portion of the sale proceeds might be attributable to those future guaranteed payments. Sometimes in these partner buyouts, part of the purchase price is actually compensation for giving up future guaranteed payments rather than just the equity interest itself. Any portion that's really compensation for guaranteed payments would be ordinary income, not capital gain. It's another layer to analyze beyond just the Section 751 hot assets. The partnership agreement and sale documentation should help clarify this, but it's worth discussing with your client to make sure the economic substance matches how the transaction is structured on paper. Also, if the selling partner has any outstanding loans to/from the partnership, those need to be factored into the overall transaction analysis too.

One thing to consider with Airbnb specifically - if you're renting for short periods and providing substantial services (like breakfast, cleaning during stays, etc.), the IRS might classify this as a "nonrental activity" instead of a passive rental activity. This could actually work in your favor. If you're providing substantial services beyond just the basic rental, you might qualify under different rules and potentially avoid some passive activity limitations. Your daily maintenance might qualify here. I'd recommend keeping a detailed log of all the services you provide and time spent. This documentation could be crucial if you're ever audited.

Has anyone used TurboTax for reporting Airbnb income? I'm in the same situation and wondering if their software handles these passive activity rules correctly or if I need to go to a CPA this year.

One thing nobody's mentioned is state filing requirements for your SPV. Depending on where your partners are located, you might need to file partnership returns in multiple states, which can add $500-1,000 per additional state filing. Also, if you're expecting substantial capital gains eventually from the QSBS investment, it might be worth paying for higher-quality tax preparation now to ensure everything is documented properly for the eventual QSBS exclusion. The difference between getting the documentation right vs. wrong could be millions in tax savings on a successful exit.

Great thread - lots of practical insights here. One additional cost consideration that hasn't been mentioned is the potential need for quarterly estimated tax payments if your SPV generates significant income during the year. While C-corp investments typically don't generate much current income (which is part of their appeal), if your HoldCo has other activities or makes distributions, partners may need to make estimated payments to avoid underpayment penalties. Your tax preparer should help calculate these, but it's an additional service that can add $200-400 per quarter. Also, regarding the QSBS tracking mentioned throughout this thread - make sure your operating agreement specifically addresses how QSBS benefits will be allocated among partners if you have different investment dates. Some SPVs lose QSBS eligibility entirely if not structured properly from the beginning, so getting specialized legal and tax advice upfront is crucial.

I'm dealing with a similar situation right now! I'm 25 and on my mom's marketplace plan but file my own taxes. When I got my Letter 12C, I was totally panicked because I thought I'd have to pay back thousands in premium tax credits. But after reading through all these responses and doing some research, I think I understand it better now. Since my allocation percentage is 0% (my mom claims 100% of the premium tax credit), I need to: 1. Put zeros on line 34 in Part II since 0% × any amount = 0 2. Complete Part IV with my mom's name and SSN showing the 0%/100% allocation 3. File the form even though I'm not claiming any credit myself The key thing I learned is that Form 8962 isn't just for people claiming the credit - it's also for documenting WHO is claiming it when multiple people are on the same policy. The IRS needs this to make sure the credit isn't claimed twice. Thanks everyone for all the helpful info! This form is way more confusing than it needs to be.

This thread has been super helpful! I'm in almost the exact same situation - 27, on my parents' marketplace plan, got Letter 12C, and was totally lost on how to handle the allocation. Reading through everyone's explanations, I think I finally understand that Form 8962 is required even when you're not claiming any premium tax credit yourself. The 0% allocation means I put zeros on line 34, but I still need to complete Part IV showing my parents are getting 100% of the allocation. One question though - when it asks for the "Premium Tax Credit" amounts from 1095-A in Part II, do I use the amounts from MY 1095-A or my parents'? I'm listed as a covered individual on their 1095-A, but I also received my own 1095-A form. I'm assuming I use my own 1095-A since that's what the Letter 12C is asking about, but want to make sure I don't mess this up! Also really appreciate everyone sharing their experiences with the various services. Nice to know there are options if I get stuck beyond what I can figure out myself.

I'm a tax preparer myself and I have to say - your concerns are 100% valid. Any professional handling sensitive tax documents in 2025 who doesn't offer secure transmission methods is being negligent, plain and simple. The IRS has specific guidance about this in Publication 4557 (Safeguarding Taxpayer Data) that clearly states tax professionals should use secure methods for transmitting client data. Regular email is explicitly discouraged because it's transmitted in plain text and can be intercepted at multiple points. Here's what I'd recommend as minimum acceptable alternatives: 1) Password-protected encrypted files with passwords sent separately, 2) Secure client portals (most tax software includes these now), 3) Encrypted email services, or 4) Secure file-sharing platforms like those mentioned by other users. If they continue to refuse, honestly, I'd find another accountant. A professional who dismisses legitimate security concerns and won't adapt their practices to protect your sensitive information is showing poor judgment that could extend to other areas of their work. Your SSN, financial account numbers, and other personal data deserve better protection than "this is how we've always done it.

Your instincts are absolutely right - this is a major red flag. I work in cybersecurity and can tell you that sending tax documents via unencrypted email is like leaving your front door wide open with a sign saying "valuable stuff inside." The dismissive "this is how we always do things" response is particularly concerning because it shows they're not keeping up with current security standards or threats. Email servers can be compromised, emails can be intercepted during transmission, and your sensitive data could end up in the wrong hands without you ever knowing it happened. Here's what I'd suggest: Give them one last chance by explaining that you need secure document transmission as a condition of working together. If they still refuse, walk away. There are plenty of competent accountants who understand that data security isn't optional in 2025. In the meantime, if you do decide to send anything, at minimum use password-protected, encrypted zip files and send the password through a different channel (text, phone call, carrier pigeon - anything but the same email). But honestly, their attitude about security would make me question what other corners they might be cutting in their professional practices.