`How do I transfer a partially depreciated asset to a member in a multimember LLC ?

[jgritsch]

I want to transfer a  trailer the llc purchased but no longer uses to the members which consists of my wife and I. Can I uses the depreciated value and consider it "Property Distribution in the capital account" If so How do I get it off the depreciation schedule without considering it a sale?

[Rick19744 · Accepted solution]

From a tax perspective this is just treated as a current distribution; property distribution. Hopefully you both have sufficient basis in the LLC.  If you don't , then this could become complicated.

In general, you will take a carryover basis in the asset distributed; this assumes that you have sufficient basis.  You will also step into any recapture potential inherent in distributed property as this carries over to the distributee member since the property is acquired in a carryover basis transaction.  

Since you are husband and wife this issue can be made a little easier.  Make sure that you distribute this out to both of you; one-half each.  There are complex hot asset rules if one member receives a disproportionate share of these hot assets.  Hot assets includes depreciation recapture type property so that is why I suggest you each get one-half or the rules would apply.  I realize that technically it is not feasible to each get one-half of a trailer, but since you are husband and wife it makes it feasible. 

I can't tell you how to get it off the depreciation schedule.  Hopefully another forum user can provide some assistance in that area.

[jgritsch]

Thanks Rick, Yes we have more than sufficient basis in our company. The carry over basis is something I didn't think about but will work out fine.
Thanks