754 election by single member LLC

[jasdlm]

Am I correct that a Single Member LLC would still need to file a 1065 (rather than a schedule E on the 1040) to make a valid 754 election?  RE agent advised that client purchase the LLC rather than the property outright to save real estate tax since the sale wouldn't be recorded at the county.  Property had substantial depreciation inside the multimember LLC that sold it.

Thanks much.  I don't do too many of these.  I've asked Mr. Google, but I haven't found a definitive answer.

[Lee B]

8 minutes ago, jasdlm said:

. . .   RE agent advised that client purchase the LLC rather than the property outright to save real estate tax since the sale wouldn't be recorded at the county.

 

It's a tossup who gives better tax advice a realtor or a barber? 

Assuming the previous LLC filed a 1065, that tax entity ended on the day the sale closed.

Which leaves a SMLLC which is a disregarded entity. 

[jasdlm]

Thank you.  I can't believe I didn't see the forest through the trees.  Essentially then he made an asset purchase, and his basis is his purchase price; no 754 election needed.  Agree?

I need to tell him that he can't use their old tax ID number.  Any other thoughts?

I really appreciate your quick response and advice.

 

[jasdlm]

Geez.  Now that I've thought this through, I feel like a complete idiot for posting this.  Sometimes I can't see the forest through the trees.  I know that never happens to anyone but me :(.

[Lee B]

20 minutes ago, jasdlm said:

Geez.  Now that I've thought this through, I feel like a complete idiot for posting this.  Sometimes I can't see the forest through the trees.  I know that never happens to anyone but me :(.

You are in very good company

[Lee B]

59 minutes ago, jasdlm said:

Thank you.  I can't believe I didn't see the forest through the trees.  Essentially then he made an asset purchase, and his basis is his purchase price; no 754 election needed.  Agree?

I need to tell him that he can't use their old tax ID number.  Any other thoughts?

I really appreciate your quick response and advice.

 

Your client's situation is a bit unusual, I wonder whether the property's basis inside the LLC (substantially depreciated) affects his basis?

[jasdlm]

6 hours ago, cbslee said:

Your client's situation is a bit unusual, I wonder whether the property's basis inside the LLC (substantially depreciated) affects his basis?

Thinking about this issue is what got me started down this rabbit hole in the first place.  Sheesh.  However, if it's treated as an asset purchase sale, then I think the LLC inside basis shouldn't affect him, right?  New tax idea for the old LLC and roll on down the road?  Am I missing something huge?

[jasdlm]

ID not idea.  Stupid auto-correct.

[Lee B]

Based on your original post, I had the impression that your client purchased each Partner's Partnership Interest in the LLC?

Do you have a copy of the Purchase Documents?

 

[Sara EA]

I once texted my son that the family would meet at Peppy B's for dinner, and the auto corrected message he got said pepto bismol.

[jasdlm]

1 minute ago, cbslee said:

Based on your original post, I had the impression that your client purchased each Partner's Partnership Interest in the LLC?

Do you have a copy of the Purchase Documents?

 

He purchased the entire LLC, so by default, he purchased the interests of all 3 members.  It's late, and I'm thick.  What am I missing?  Is there a way he could purchase the undivided whole when it has 3 separate owners?  

[Lee B]

That's my point, he purchased the LLC, he didn't purchase the assets.

[jasdlm]

Right, but since the partnership terminated for tax purposes, I think Rev Rul 99-6 says that he made an asset purchase.  Eager to hear your thoughts on this.  I haven't had to do this before.  Thank you for having this conversation with me.  I'm truly grateful.

[Abby Normal]

9 hours ago, jasdlm said:

Right, but since the partnership terminated for tax purposes, I think Rev Rul 99-6 says that he made an asset purchase.  Eager to hear your thoughts on this.  I haven't had to do this before.  Thank you for having this conversation with me.  I'm truly grateful.

I agree it should be treated as an asset purchase because the transaction happened all at once. Just allocate the purchase price to the assets and start depreciation over.

[jasdlm]

Thank you!!