Some follow-up comments:
- You will need to prepare a K-1 for member #1 from the beginning of the tax year to their DOD. This K-1 will be used on member #1 final 1040.
- You will then need to prepare a K-1 from DOD to when it was purchased by member #2. This K-1 will be used by the estate when preparing the estate form 1041.
- Only member #2 will be eligible for the Section 754 step-up; along with the Section 743 adjustment.
- You shouldn't have to adjust the balance sheet. The Section 754 and 743 adjustment is for tax only. As a result, you will always have a book to tax difference.
- While I am not on a Windows environment to see the software, you should be able to enter the time period in the member / partner information section.
- The estate tax return will reflect a step-up to FMV, assuming an estate tax return is required. But this step-up is not the same as the step-up for Section 754 purposes. While the figures may be the same, two difference matters.
*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.
