The additional information is helpful.
- Well......you have bad news and quasi good news; in that order.
- Obviously I don't have the details of the situation at the time of the inheritance, or whether the CPA understood what transpired. It appears, based on the limited facts, that the CPA did know that the transfer occurred, and could have easily taken care of this at the LLC level had they wanted to; but once again, I don't know the timing of all the events. The cite is Regulation 1.743-1(k)(2)(ii) with respect to the reporting information to the LLC.
- So the bad news is that since no election was made at that time, there is a timing difference between inside basis and your outside tax basis.
- As a result of this, you will not get any benefit of the step-up until you exit the LLC. This is the quasi good news portion, because while there was no inside basis adjustment (no Section 754 election made for you with a Section 743 adjustment), your outside tax basis was stepped up, as the starting point for your outside tax basis was the FMV at date of death.
- Had there been an inside basis step-up, this timing difference would have decreased over the years for each property and you would have had a different inside basis for each property, resulting in a different gain or loss when a property was sold.
- At this point it is water over the dam. You don't lose out on anything, it is just a matter that the timing of any benefit is longer than expected or desired.
*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.
