@allyphoe , You are correct that it’s complicated and I believe I have confused people by the way I’ve explained it. I am taxed on the pass through income and the business pays our tax liability but nothing more, so it appears to colleges that I have a much higher household income than I actually do. Pass through income is reported to FAFSA (and CSS Profile) as if it’s my actual income, etc., as you probably know.
The business is going to buy back my shares because I want out (for various reasons, not just because of their negative impact on the college financial aid formula). We were given a window of time where they will redeem and after that, they are not required to do so.
I only learned this past Thurs (at a meeting) that a 1/1/18 redemption was available, at which point I left a message for my accountant (to no avail). The following day I found out that a payment plan (versus lump sum) option was available. I figured that it was worth at least considering the idea of removing that pass-through income for the 2018 base year for child #2, and also worth considering an interest-included payment plan versus lump sum option. Seems too complicated the more I learn.
At this point I believe I’ll just take a lump sum redemption effective 1/1/19. The January date makes it a clean tax year and I won’t receive a K-1 in 2019.
Thank you all for your input.