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rjkoz
New Member

Do I enter an LLC Members Capital Contribution of Personal Property as an Asset in TurboTax Business?

I'm using TurboTax Business to create 1065/K-1s for a Multi Member LLC as a partnership.  One Member Contributed Personal Property at Fair Market Value as part of their Capital Contribution (interest).  The property is all Home Office equipment (some new, some from the partner's closed Sole Proprietorship (used an partially depreciated).  Does this property get entered into TT Business?  If so, where?

1 Best answer

Accepted Solutions
Rick19744
Level 12

Do I enter an LLC Members Capital Contribution of Personal Property as an Asset in TurboTax Business?

Comments on your question and other related matters:

  • The property contributed is entered as assets and depreciated.
  • You will probably need to maintain two sets of depreciation; one based on FMV (economics of the transaction) and one based on the adjusted tax basis.
  • The issue here is the FMV of the assets may be higher than the adjusted tax basis in the hands of the contributing partner.  As a result, there is a regulation that deals with this issue.  The regulation is in effect to prevent the shifting of any precontribution gain.  Section 704(c).
  • There is some complexity here, however, the bottom line is that the rules provide for three methods to eliminate this built in gain; traditional, traditional with curative and remedial.
  • The jest to the regulations is that it shifts more tax depreciation to the noncontributing members, which allocates the built-in gain to the contributing member.  You will need to continue to make this special allocation until the built-in gain is eliminated.
  • The details of handling this is really beyond the scope of this forum.  You may want to consult a tax professional depending on the $$ involved.
*A reminder that posts in a forum such as this do not constitute tax advice.*

View solution in original post

2 Replies
cam2
Level 1

Do I enter an LLC Members Capital Contribution of Personal Property as an Asset in TurboTax Business?

I have the same issue. How does one "maintain two sets of depreciation" in turbo tax?
Rick19744
Level 12

Do I enter an LLC Members Capital Contribution of Personal Property as an Asset in TurboTax Business?

Comments on your question and other related matters:

  • The property contributed is entered as assets and depreciated.
  • You will probably need to maintain two sets of depreciation; one based on FMV (economics of the transaction) and one based on the adjusted tax basis.
  • The issue here is the FMV of the assets may be higher than the adjusted tax basis in the hands of the contributing partner.  As a result, there is a regulation that deals with this issue.  The regulation is in effect to prevent the shifting of any precontribution gain.  Section 704(c).
  • There is some complexity here, however, the bottom line is that the rules provide for three methods to eliminate this built in gain; traditional, traditional with curative and remedial.
  • The jest to the regulations is that it shifts more tax depreciation to the noncontributing members, which allocates the built-in gain to the contributing member.  You will need to continue to make this special allocation until the built-in gain is eliminated.
  • The details of handling this is really beyond the scope of this forum.  You may want to consult a tax professional depending on the $$ involved.
*A reminder that posts in a forum such as this do not constitute tax advice.*

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