Topic Tax TopicsTaxDistribution
Despite a wealth of misinformation about the subject found on the Internet, taxable distributions in the charging order context are quite simple:
Creditor Holds A Charging Order Lien: Even though the creditor gets the economic distribution, the taxable distribution goes to the debtor/member who gets to pay it (and not the creditor).
Charging Order Lien Has Been Foreclosed: The purchaser at the judicial sale of the debtor/member's (now-former) interest becomes an assignee of the interest (albeit an involuntary assignee with no management, voting or information rights, etc.), and thus the taxable distributions go to the purchaser.