Charley in Ohio Posted February 26, 2009 Report Share Posted February 26, 2009 We have a client who transferred LLC units from himself to his wife during 2008 for a few of his businesses (for reasons other than tax). These transfers meet the technical termination definition under Sec. 708 - (greater than 50% of profits and capital). Therefore, the LLC should end on the date of transfer and I'll have two short years in 2008. My problem is that whether I file I return with the proper pro-rata allocation of the income (based on the varied interests during the year which I would do if I didn't have the termination) or file two returns, the income would be reflected the same on the 1040s. My only issue I can see of not filing two returns is that the LLC would be not be able to elect any basis step-up under Sec 754 (which they wouldn't want to do as there are no significant assets) and wouldn't lose the right to make new elections (which I don't forsee as an issue either). Anyone have any comments on whether filing one return or two?? Thanks. Charley Quote Link to comment Share on other sites More sharing options...
RoyDaleOne Posted February 26, 2009 Report Share Posted February 26, 2009 I am in the office so I can not check, however, I would guess that there is not a termination of the partnership, under this set of facts. I could be wrong and will post more later. Quote Link to comment Share on other sites More sharing options...
RoyDaleOne Posted February 28, 2009 Report Share Posted February 28, 2009 Only sales and exchanges of partnership interests are relevant to termination under Code Section 708((1)( -- transfers by gift and devise are ignored, as are liquidations of partnership interests. Reg. Section 1.708-1((2). Quote Link to comment Share on other sites More sharing options...
Charley in Ohio Posted February 28, 2009 Author Report Share Posted February 28, 2009 Thanks for the input!!! Charley Quote Link to comment Share on other sites More sharing options...
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