Purchased partner's 50% ownership of an LLC on November 1

[nicholas13]

Thanks for the thoughtful reply.

Where all previous assets were (by using the 179) fully depreciated in the year of purchase, there does not appear any depreciable assets left, except a 10,000 piece of equipment we bought this year (TT won't let me take the 179 on that for the short year) and the cash in the account.

Can I force TT to allow the partnership to apply the 179 to our $10,000 piece of equipment, and thereby avoid the Section 751 altogether?

If so, do we both still need to complete a 8594?

Thanks for your patience and time

[Rick19744]

Follow-up comments:

• You don't avoid Section 751.  Regardless of how or when the asset was depreciated, you still will be subject to Section 751; or your partner will.
• Doesn't matter whether the asset is fully depreciated or not, your partner will still have their prorata share of depreciation recapture; to recognize as ordinary income.
• The only way you would not have any Section 751 is if the LLC had zero tangible personal property; which does not appear to be the case.
• You don't need to complete the form 8594.  You purchased your former member's LLC interest. 
• As a result of partnership tax law, your selling member is "deemed" to have sold assets.  It is the "look-thru" partnership concept.  Not an actual sale of the assets, it is a deemed sale for partnership tax purposes.  
• That is the whole point of Section 751; not being able to convert ordinary income into capital gain.
• You do need to complete form 8308 for the selling member.

[nicholas13]

Thank you. This makes sense on the partnership side. I feel like our final Partnership 1065 is looking good.

For my Schedule C - is there a place to enter my allocation of the purchase price.

Is it suggested to do that, somehow, under TT "Startup Costs" for my new SMLLC business?

Or is this part of the tax fiction?

[Rick19744]

Your allocation of the purchase price goes to the assets that were purchased "deemed liquidation" of the 1/2 of the assets you purchased from your partner.

You don't have any start-up costs.  This is and has been an operating business; it is now just in a different entity type.