topic Accumulated Depreciation for existing Parter when filing 754 step up in basis in Business & farm

Accumulated Depreciation for existing Parter when filing 754 step up in basis

kforsette — Sun, 26 Jan 2025 21:48:40 GMT

I have an LLC with 50/50 partners. One of the partners sold his 50% interest. I am doing a 754 step up in basis. I know that the original partner can only take depreciation on 50% of the original cost of the building. The original building has a cost net of land of $170,000 and accumulated depreciation of $20,807. When I calculate his depreciation for this year his cost would be $85,000 but do I allocate accumulated depreciation of $10,403.50 or the full $20,807? I read someplace that all prior depreciation stands as it was, which to me means you list it all, but that does not make sense to me.

Re: Accumulated Depreciation for existing Parter when filing 754 step up in basis

MaryK4 — Tue, 04 Feb 2025 00:01:21 GMT

If you have a 2 partner partnership and one partner leaves, by action of law the partnership no longer exists and becomes a SMLLC or you have to elect to treat it as a corporation. Since 754 applies to the inside partnership basis, you cannot use it if the partnership dissolves.

Re: Accumulated Depreciation for existing Parter when filing 754 step up in basis

kforsette — Tue, 04 Feb 2025 00:22:57 GMT

When the membership was sold only 5% was sold initially and then the other 25% was sold so there would have been 3 members at one point?

Re: Accumulated Depreciation for existing Parter when filing 754 step up in basis

kforsette — Tue, 04 Feb 2025 00:24:20 GMT

We never dissolved the partnership.

Re: Accumulated Depreciation for existing Parter when filing 754 step up in basis

MaryK4 — Wed, 05 Feb 2025 16:57:17 GMT

The partnerships dissolves by action of law. You cannot have a partnership with one person. @kforsette