Step up Basis -Inherited llc interest

[agribs]

Inherited LLC Interest - Step-up Basis

Two spouses each own 50% in a Rental LLC.  The LLC has filed 1065's since inception.  Each spouse receives a K-1 and both K-1's are reported on the Joint tax returns.  When one spouse dies and the surviving spouse inherits the  deceased spouse 50% share, can the surviving spouse get a step-up basis on the inherited 50% interest? 

[M-MTax]

If you live in a common law state, then one-half of the assets in the LLC get a stepped up basis.

If you live in a community property state where the LLC interests are held as community property, then 100% will get a stepped up basis.