Step Up basis rule

vmwatson · ‎April 12, 2026

My late husband and I had an LLC that owned 1 piece of rental property (the LLC was the listed owner, but we were the only people involved with the LLC). He and I were the only owners and managers of this LLC. My late husband died in 2018. I sold the rental property in 2022. I reported it on taxes using the original purchase price in 2013. Since it was owned by the LLC, was I able to use the “Step-up basis rule” to use as the adjusted cost basis? 2) If so, I was unaware that I should have gotten the property appraised at his death in 2018, so can I use the 2018 property tax value as the cost basis, (my state is a community property state and assesses the property taxes at the Fair Market Value)? 3) I am considering filing an amendment to my tax return & understand that I have 3 years from when it was reported on my taxes (April 15, 2023), so I need to decide by April 15, 2026. Will an amendment such as this most likely cause an audit? Thank you so much for your assistance.

DianeW777

The answers to your questions are shown below.

Yes, an LLC can utilize a stepped-up basis on a rental house after a partner dies, but it is not always automatic. It typically requires the LLC to be taxed as a partnership and for the LLC to make a Section 754 Election, which adjusts the inside basis of the property to match the new, higher fair market value (only half of the property would receive the stepped up basis if you were also the other ownerof the property at death).
This is may be relevant since it was sold in 2022 and the statute will run out April 15th, 2026. Be sure if you change it, you have a confirmed mail date before April 15th.
This change would not in and of itself create an audit. Be sure you have the relevant documents to keep with your tax return.Follow the instructions in the link below to obtain the necessary TurboTax Desktop products (2024 and 2023).

The amendment can be completed using the steps below and if necessary you can use the IRS transcript for your original 2022, 2023 or 2024 tax return, if you do not have a copy or did not use TurboTax.