Technical topics regarding tax preparation.
2-Jun-2023 5:24am
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Is there a way for partners to transfer real estate from one partnership (LLC2) deemed to be a capital distribution from another partnership (LLC1) without having to report a taxable capital gain?
Situation - PS/(LLC1) is owned equally by 4 partners with one partner (P1) having large capital account balance. 3 of these partners (P1, P2 and P3) also own another (LLC2) holding real property. The partners in LLC2 would like to give P4 100% of the real property in LLC2 as if it is a capital distribution from LLC1. Would there be a way to do this without any current tax consequence? Note: Even though P4 is not technically an owner in LLC2, the owners externally consider him "like" an owner. They just never did anything formally to add him as an owner.
2-Jun-2023 6:50pm
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Even if they "externally consider P$ to be a partner in PS2, why would P1, P2 and Ps "give" P4 100% of PS2's real estate?
And in what way does P4's ownership in PS1 have anything to do with PS1 giving property to P4?
3-Jun-2023 5:14am
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All partners agree that they want to give the real estate property from LLC2 to P1 to satisfy a distribution of capital from LLC1.
3-Jun-2023 9:17am
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Aha! So is it to get them to equal capital accounts in PS1 or to redeem out P1 completely?
Seems like a 731 distribution from PS2 to its 3 partners followed by a 721 contribution by those 3 partners to PS1 followed by a distribution by PS1 to P1.
Without current tax consequence? I'd have to think more about that, which I'll do, but by the time I do, someone else will post chapter and verse for the correct answer.
Methinks the answer is somewhere in this article.
https://www.thetaxadviser.com/issues/20 ... perty.html
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