LLC Partnership - Dispute with payout after sale of property

[Young Kim]

Hi, 

I'm a minor partner in an LLC with one other partner. We sold the property held within the LLC a few months back and my partner wanted to 1031 exchange his portion and I wanted to be paid out. As the major partner in LLC, my partner went ahead and 1031 exchanged his portion and kept some proceeds from the sale in an exchange account to pay me out. However, this course of action by my partner created a taxable transaction and will have tax liability on the amount he uses to pay me out. My partner is trying to deduct his tax liability from my payout, and I don't see how I'm responsible for his tax liability, which he has the option to deduct once he sells his new property. We unfortunately don't have such a situation laid out in our operating agreement. Has anyone dealt with such situation? Any advice? Thank you in advance!

[Dave Foster]

@Young Kim That should be correct. Your final payment should be a tax free distribution from your capital account to close out the LLC. But of course that's for your accountant to verify.