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First I should say that my wife and I have both been married before so the children (two sons) are hers.

Sorry about the error in my memory. Feel free to correct all of the pronouns in my earlier post accordingly.

the business checking account supposedly used to pay the LLC expenses was a remainder from before the LLC was formed and was never put into the LLC

OK. So it was your wife's account and not the LLC's. In that case, I'd probably split the advice from earlier in the thread. Any expenses that related to the time she owned the LLC would be properly deducted on her (or your joint) tax return. The rest of the payments I'd consider to be a gift to her son. Depending on the amount and timing of those gift payments, she might need to amend the previous gift tax return and/or file a gift tax return for this year.

--Peter
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