Tax Treatment of stock shares distribution from LLC

What is the name of your state? CA.

Formed an LLC two years ago with 7 other partners to invest in Paypal an online payment service company. Half of the money I invested was mine and the other half belongs to 3 other family members that are not listed in the LLC. ( I am a Nominee?) Paypal went public and now our lockup has expired.
So the stock certificates are now being held in my name at Charles Schwab in the LLC account. Schwab will re-register and distribute the certificates to the family members($75. per person)

I already have my K1 for 2001 representing the total portion.

Keeping in mind taxes, how do I best distribute the shares to my family?
Thanks
[email]Bradfrance@hotmail.com[/email]

If you held the shares on behalf of family members, and you gave them their share of any distributions, then what you should do is file 1099s for each of the other owners showing the amounts allocable to each. You must also furnish a Form 1099 to each of the other owners. File the new Form 1099 with Form 1096 with the Internal Revenue Service Center for your area. For more details, see the Instructions to Form 1099.

After that, you report as your income, only the amount allocable to yourself.

Thanks for the advice . THe IRS said a similar thing...but I was told another idea...
To repay my family with stock shares in the amounts that they originally "loaned" to me to invest on their behalf and then to finish off the balance-gift to them . Any amount I still owe over the 11K limit I will gift next year.

There are two problems here:

(1) Income from the shares while they are in your name. If you don't want to pay the tax on all that income, do as the IRS and I said.

(2) The transfer of the shares to your family members.

a. You can do as you have heard. That will probably work

b. You can transfer the names on the appropriate shares to them, not as a gift but as the trustee for the shares. They were "partners" with you on the deal. You put the shares in your name, but actually their part you were holding as a trustee for them. Now you transfer the shares, and it is not even a gift.