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Section 754 Basis Addjustment to Partnership Assets


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#1 joelgilb

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Posted 06 June 2008 - 10:46 AM

I have a Family Real Estate Partnership where one of the partners died and his 4 kids inherited (via a taxable estate) his interest in the partnership.

The kids have decided to make a Section 754 election to adjust the basis of the assets in the partnership for there % interest. I am trying to figure out how to get ATX to allocate the increased basis only to their shares and how to get ATX to automatically allocate the depreciation in current and future years only to their accounts (both for Income and Loss as well as Capital account).

I believe I can adjust the basis of their interest in the partnership through the "Special Allocations Input Sheet" in the return, by showing the step-up as a contribution of property. But I am pretty sure this will not help with ongoing depreciation, both to their income or their capital accounts.

So for instance if the assets were worth 450,000 before the death of dad, and after 750,000, and he had a 40% share, the step-up will be 750k-450k=300, 300*40%=120K step-up for kids "ONLY". for an asset value of 570K, before current and accumulated depreciation.

I know I could manually allocate, but this would cause a lot of extra work now and in the future. Plus I have to remember to do the allocation each year... malpractice waiting to happen!

So far this has been beyond the ATX support staff, but I am trying to get to the upper level support personnel and or the programming staff.

Actually had a CPA/Atty fried that uses Intuit Proseries, suggest 2 returns, one to trak the kids step-up and one to actually prep for filing. then manually merge attributes each year. WHAT A PAIN! But maybe only answer.

Anyone know how to handle this in ATX?

#2 BulldogTom

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Posted 06 June 2008 - 11:42 AM

I am not sure, but I think I remember that you add a second asset called the "stepped up basis" or something else that will que you in to what it is, and then allocate 100% of the depreciation on that asset to the inheriting shareholder.

Just a thought, but not real sure.

Tom
Lodi, CA

#3 joelgilb

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Posted 06 June 2008 - 02:00 PM

I am not sure, but I think I remember that you add a second asset called the "stepped up basis" or something else that will que you in to what it is, and then allocate 100% of the depreciation on that asset to the inheriting shareholder.

Just a thought, but not real sure.

Tom
Lodi, CA

That's what I thought that I needed to add an asset that was "Stepped Up Basis", but I don't know how to allocate the tax attributes without doing it manually.

#4 joelgilb

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Posted 07 June 2008 - 09:35 AM

Anyone know how to use the K-1 special allocations page to get the tax attributes to flow only to the partners that are entitled to the step-up?

Atx's promise of a call back Friday, did not happen. Surprise Surprise, (said Gomer Pyle)

#5 michaelmars

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Posted 09 June 2008 - 08:51 AM

not an answer to your question but another comment-

don't forget that some of the 754 has to go to land so you have 2 754's, depreciable and non-depreciable land 754.

#6 joelgilb

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Posted 09 June 2008 - 04:19 PM

not an answer to your question but another comment-

don't forget that some of the 754 has to go to land so you have 2 754's, depreciable and non-depreciable land 754.

Thx for the reminder here.

Still need to find a way for ATX to allocate though.

#7 joelgilb

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Posted 10 June 2008 - 11:14 PM

Doesn't anybody have any idea how to use ATX to allocate the tax attributes?

ATX support is not calling back with any ideas.

#8 joelgilb

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Posted 12 June 2008 - 03:08 PM

As Rush Limbaugh (not a fan btw) would say:

Hostage day 6

Calling ATX daily now and still not getting anymore than promises of a callback from development.

#9 RoyDaleOne

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Posted 12 June 2008 - 06:54 PM

I looked at your request and could not find an answer without using manual allocations.

The depreciation could be setup as unassigned for the increased depreciation expense computations, however, I could not find a way to automatically allocation this amount to the K-1s.

I have not used the ability to create some type of special worksheet, so I don't know how to do that.

#10 joelgilb

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Posted 13 June 2008 - 08:47 AM

I looked at your request and could not find an answer without using manual allocations.

The depreciation could be setup as unassigned for the increased depreciation expense computations, however, I could not find a way to automatically allocation this amount to the K-1s.

I have not used the ability to create some type of special worksheet, so I don't know how to do that.

I am afraid even with a special worksheet it will be a manual calculation. And I don't know if I want the depr to be unassigned as when a unit is sold I want to be able to pickup all the unallowed losses.

My guess is I will have to use an excel spreadsheet to keep trak of this from year to year and then manually allocate.

#11 joelgilb

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Posted 13 June 2008 - 04:22 PM

Hostage Day 7.

Still no callback, but I again called them and complained.

#12 RoyDaleOne

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Posted 13 June 2008 - 04:24 PM

I like the Alfred Thaddeus Crane Pennyworth pic better than Alfred Joesph Hitchcock pic.

You could assigned the unasigned at sale time.

Billing time love that song. You know it?

#13 joelgilb

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Posted 13 June 2008 - 04:30 PM

I like the Alfred Thaddeus Crane Pennyworth pic better than Alfred Joesph Hitchcock pic.


He will be back after the hangins

You could assigned the unasigned at sale time.


That makes sense. Not sure how it helps allocate to the specific partners yet, but it probably will make it easier.

Billing time love that song. You know it?


Yes and love it. Couple of versions out there and I had first heard the attorney version.

#14 joelgilb

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Posted 17 June 2008 - 02:32 PM

Hostage day 11.
Hair getting gray (what's left of it).

Still no return calls, even though I have called them Each and Every day requesting one.

No one at the first level of tech support even understands what I am asking and all have promised a callback from the development team.

Client ready to take my head off. guess if that happens , the gray hair won't matter!

#15 zeke

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Posted 17 June 2008 - 02:41 PM

I don't care about your hair, but please keep your head on!

#16 joelgilb

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Posted 17 June 2008 - 02:57 PM

I don't care about your hair, but please keep your head on!

Keeping head on. Thx Hangman!


Anyway, Just got off the phone with ATX and OMG an Answer! Big workaround, and will post it once I get it entered and working (not easy to do, but should work).

#17 kcjenkins

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Posted 18 June 2008 - 12:18 PM

We will certainly be interested in learning the solution, once you have it, Joel. Even though I've never had the problem, it's funny how often once you start looking at some esoteric problem, wham, here comes one like it. So if there is a good answer, I want to know about it.




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