Yes, you report a property distribution to the LLC members equal to the partnership's adjusted basis in that property. The distributed basis becomes the member's basis, with the same holding period. Under Section 731(a), distributions of property are not taxable to the member if the value of the property does not exceed the member's tax basis in the LLC. This is the member's outside basis, not the member's capital per the partnership.
You will need to calculate the partnership's adjusted basis (net of depreciation) in the property immediately before the distribution is made. See IRS Pub 527 Adjusted Basis for more information.
In TurboTax Business for Form 1065, the allocated distribution amount is entered under Business Info >> Partner/Member Information on the "Member Capital" page for each member.
Or you can enter this manually on the Sch K-1 Wks using Forms Mode. Distributions appear in the left column under Capital. (Note this form has an embedded scrollbar to move between partners.)
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