My accountant informed me that if I hold my rental in an LLC, and I 1031 exchange it and I die there is no step up in basis. I would have to hold it personally for my family to get that tax forgiveness. Any other downsides to holding real estate in an LLC?
@Joel Brown , It's a conundrum for sure. Not thinking to argue with your accountant but to raise a point that's being considered other places: It may make a difference on the nature of your LLC. If it is a disregarded entity there's a school of thought that the Schedule E values are indeed stepped up as the LLC is disregarded.
In any event it is the nature of holding that is your issue. Whether or not you perform a 1031 exchange will have no bearing on the step up.