Business & farm

These type of situations / transactions can be difficult and may need a tax professional to help get it right:

• Your transaction is described in and provided guidance in Revenue Ruling 99-6 situation 1; going from a multi-member LLC to a single member LLC.   
• For TT you should show the assets as "sold", but you will need to adjust the sales price so there is no gain or loss reflected.
• You will need to save and print out the depreciation detail as you may need this.
• As you noted, you will end up will all the assets.  Your basis in these assets will now be bifurcated
  • 1/2 of each asset "may" remain the same which is your portion of each asset (I say may change as noted below in sub bullet 3 below).
  • 1/2 of each asset will now take a new basis equal to your purchase price paid for these assets.  
  • Additionally, your basis in your 1/2 of the assets may now take a substituted basis as when these assets get distributed out to you the basis in these assets can't exceed your basis in your LLC interest.  There are specific rules / guidance in how this allocation process works.
  • The basis of the assets for you is determined as if all the assets were deemed liquidated to both you and your partner, and then you purchased the assets from this individual.  Once again, this hypothetical deemed liquidation is only for determining your basis in the assets.
• You will also need to inform the selling member of their share of Section 751 property (hot assets).  This will be their share of depreciation recapture.  They will need to report this as ordinary gain.  Determining the selling member's gain needs to be worked through as well, however, that is their issue.