A 3 partner partnership owns a rental property.
P1 & P2 are adult children
P3 with 60% ownership are husband and wife equally with their ownership interest held in a family trust (living trust)
Husband died in 2020. The entire 60% ownership was transferred to a martial trust upon death.
Is Sec 754 election allowed in this situation to step up H's basis?
If yes, is the step up for the entire 60% ownership interest? This is in CA a community property state. Or would the trust ownership limit it somehow?
If Sec 754 election is allowed, it can be late filed with a 12 months relief procedure on a 2020 amended partnership return. Is it worth the hassle? Besides the additional depreciation what other benefits would the wife get? She's in her 80's, there's no plan to sell the property and the children who are the other 2 partners will inherit it.
Another question on tax reporting. The client's lawyer got an EIN for the marital trust and is instructing to report the 60% ownership under the trust. So if a K-1 will be issued under the trust's EIN, does a 1041 need to be filed or can it be reported on the wife's 1040?