allocation of step up in basis to inherited interest in commercial real estate LLC

Forum|Forum|3 years ago
March 31, 2023
2 replies
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I inherited an interest in a commercial real estate LLC that owned 3 properties. Per the estate tax return (which was filed and accepted by the IRS), the FMV of inherited interest was $90,000. The return did not provide a separate analysis of the FMV of each property. In 2008, the LLC sold one of the properties. When I filed my 1040, I did not allocate any of the step up to that property. In 2022, the LLC sold the 2nd property. Can I apply $45,000 of the step up when calculating my net gain on the sale of the 2nd property or has the portion that should have been used for the sale of the 1st property been lost?

Anonymous_

Employee

I am going to page @Rick19744 since he is intimately familiar with basis and distributions with respect to partnerships and S corporations, which are pass-through entities with their own set of rules.

However, there is a threshold question:

Is the LLC you inherited a single-member LLC or multiple-member LLC?

attykss1Author

multi-member LLC

Rick19744

Employee

It would be good to understand the response to @Anonymous_ question.

In addition, depending on the response to the above question, if this is a multi-member LLC, was a section 754 election made at the time of inheritance?

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

attykss1Author

some LLC had section 754 deductions prior to the year I inherited my interest but a section 754 was not applied by the LLC's CPA to my inherited interest.