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mutual consent or agreement, by the parties to the assignment and
assumption agreement, to waive the requirements of article 10 of
the LLC operating agreement.15 Therefore, the sales of LLC
membership interests pursuant to the assignment and assumption
agreement were not void by reason of noncompliance with the
aforesaid article 10.16
E. Conclusion
Ms. Moore owned a 12-percent membership interest in the LLC
during the years at issue (1999 and 2000).
III. The Installment Method Reporting Issue
A. Analysis
Respondent argues that petitioners are not entitled to
report their income from the sale of Ms. Moore’s membership
interest in the LLC under the installment method of section 453.
Respondent asserts that petitioners opted out of the installment
method, pursuant to section 453(d), “by reporting on their
original return all of the income they believed they received in
15 The waiver of articles 10.2 and 10.3 of the LLC
operating agreement necessarily rendered the balance of the
otherwise applicable provisions of article 10 inoperative.
16 Petitioners’ argument that Dr. Joffe’s purported
transfers of LLC membership interests as of Jan. 1, 1997, were
invalid does not extend to the validity of those same transfers
as of July 2000. There is no evidence that Dr. Joffe transferred
membership interests to Dr. McKernan and Ms. Moore other than by
means of the assignment and assumption agreement. Therefore,
petitioners’ argument that that agreement was void ab initio is
obviously inconsistent with their admission that the transfers
occurred in July 2000 pursuant to that same agreement.
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