Tax implications of back-dating a sale of interest in LLC

[Chris Soignier]

I negotiated the sale of my interest in an LLC that owns an apartment complex last December. The buyer/deal sponsor wanted to do it 12/31, and I suggested we do it first week in January so I could defer my tax on the capital gains another year. Turns out that was overly ambitious, as January was spent waiting on his attorney to produce the sale agreement. Since then, every week this month there's been another delay, which is frustrating to say the least. Making it worse is that the buyer insists that we backdate the transaction to 1/1. IMO, this is inequitable, since he'd get the benefit of the tax losses over that period, while still having use of the money over it. I suggested that given how much time has passed, we either date the transaction the current date (which seems most transparent and ethical to me, I'm not a fan of backdating) or he pays me a reasonable interest rate on the proceeds from 1/1 until funding. The sponsor, being the butthead he can be, is unyielding. My inclination is to give him the middle finger and continue being a thorn in his side (his ethics, transparency, competence, and communications skills leave a lot to be desired), but my wife is encouraging me to just suck it up, take the money, and move on. This is the only multi-family investment where I'm dissatisfied w/ the sponsor....the property would do fine if it was well-run.

Is backdating such a sale legal, and in doing so, would I give up my legal rights to the tax loss for the time in '16 that I actually owned the interest?