Investors & landlords

Okay.  With the additional information, my follow-up comments are as follows:

• Essentially what you have is a partnership division under Section 708 of the Code and applicable regulations.
• In this case, you will have a "divided" partnership and a "recipient" partnership.
• In your case, the "divided" partnership is the original partnership, and the "recipient" partnership is the new partnership.
• Since I don't have any details, and most likely nothing was documented, we will assume that this was an assets-over transaction.  This is the default transaction if no other form was documented.
• When one of the resulting partnerships qualifies as the divided partnership (which your original partnership qualifies),  it is considered to contribute certain assets and liabilities to one or more recipient partnerships (your new partnership) in exchange for interests in such recipient partnerships and then distribute the interests to some or all of the divided partnership's partners in complete or partial liquidation of those partners' interests in the divided partnership.  In your case, you are distributing this new interest out to you and your brother in the same ownership ratio.
• This distribution amount will be the adjusted basis of the property that was transferred to the new partnership.
• You will essentially step-into-the-shoes of this property with the new partnership; same depreciable life, holding period, method, etc.  Essentially as if nothing changed; as in essence, nothing did.
• Your tax capital basis in the new partnership will equal the adjusted basis of the property transferred.
• There are other items that should be documented such as FMV of this property at the transfer date.  This would come into play if you added another member; built-in gain issue and Section 704(c) allocation.
• Both partnerships are considered "continuing" partnerships since both have members that owned more than 50% of the prior partnership.
• A resulting partnership that is treated as the divided partnership (your original partnership) must file a return for the tax year established by the prior partnership and retain the prior partnership's tax ID, tax accounting methods, and tax elections. The return must include a statement that the partnership is a continuation of the prior partnership. (This should also be written across the top of the first page of the return.) The statement must list the distributive shares of the partners for the period up to and including the date of the division and for the period after that date. The statement must also include the names, addresses, and tax IDs of all other resulting partnerships that are treated as continuing partnerships (the new partnership).
• Resulting partnerships that are regarded as continuing partnerships (the new partnership), but not as the divided partnership, still remain subject to the prior partnership's accounting methods and tax elections.  Essentially the new partnership must maintain all accounting methods and elections as your original.
• These continuing partnerships must also include a tax return statement disclosing the name, address, and tax ID of the prior partnership.  This means that your new partnership must include such a statement.

As you can see, there are numerous issues that need to be addressed and documented.  To get this right, you may want to consult with a tax professional for the year of the division.