@teachwithgames_com wrote:
How does the cost basis "step-up" in this situation?
This gets really complicated very quickly and one of the reasons is what passes to heirs (or your mom, as the case may be) is not the rental property, it is your father's interest in the LLC. Thus, included in your father's estate at the time, would be his LLC share which is not even real estate, it is intangible personal property.
Since the LLC owns the real estate (presumably title is in the name of the LLC), an election is typically made - to the best of my recollection, technically termed a Section 754 election - which has the effect of increasing the inside basis of the deceased member's share.
If the above sounds fuzzy, difficult to understand, or just plain incomprehensible, then that only serves to reinforce the point that you need a tax and/or legal professional for this scenario.
