Our firm has engaged with a 5 partner partnership. All are related.
They have a personal home used by one of the partners on the books. This was recorded about 5 years ago. It has never been depreciated, and it doesn't appear that they have ever deducted expenses through the partnership. They were treating as an investment property. The brother lives there with his family.
After further research, this property is actually owned in the name of the brother (who is living there), not the partnership. All the partners are fine with this. This brother is the only US citizen, the others are all nonresident aliens, if that has any consequence.
It was originally recorded on the books as a debit to "House" and credit to cash.
We are trying to determine how to handle. Do I propose to write off as a distribution at book value, or do I need to distribute at fair value to the brother? The estimated market value is $1 million, the book value is $600k. Any other options?
Thanks so much for any guidance.