Partial Sale of Single Member LLC

Technical topics regarding tax preparation.
#1
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400
Joined:
19-Nov-2014 5:47pm
Location:
USA
Single member LLC owns a building. The rental activity before the sale was reported on the owners personal tax return.

The owner of the single member LLC sells 50% of the LLC to another person. The LLC interest was sold for $300,000 more than the cost basis. 50% of the cost basis of the building was $900,000 before the sale. The sale price for 50% of the LLC was $1,200,000.

The LLC is now a partnership post sale.

Does the new 50% owner get a step up in the cost basis for depreciation purposes? It seems like the same end result of a 754 election and 743 adjustment. I just haven't encountered this before.
 

#2
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6043
Joined:
22-Apr-2014 3:06pm
Location:
WA State
Yes, you'll need to set up a 704(c) allocation. Tax basis of new partner's 50% will be much higher than old partner's 50%.
There's a great Tax Adviser article describing 704(c) as well as some good discussions here.
~Captcook
 


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