I'm in the same exact situation - deciding whether to realize passive losses now (which are on the order of only a few dollars), or carry the tax basis forward to the new C Corporation stock until (when and if) I dispose of that.
The only thing that had me thinking is whether those "passive losses" were already accounted for in the past year's tax returns since the LLC is a pass-through entity.
To use simple numbers, assume I had a $500 original investment, and the Partner's ending capital account under Section L of the Schedule K-1 is $495 - do I realize the $5 in losses at the time of this conversion, or keep the original $500 cost basis for when and if the new C Corporation shares are disposed of? Or was that $5 loss technically already included in past year's returns, so I'm just going to use the $495 as the only basis for the new C Corporation shares?
Out of curiosity, what did you end up doing?
