We have a family partnership that owns two rental properties (a Single Family House and a Duplex). It started out as a simple partnership in 1995 (Dad & Mom, #1 Son & Wife, #2 Son & Wife). After the unexpected death of my brother in law in 2006 and the complications that ensued by not having a clear operating agreement for the partnership, we agreed to form an LLC. We did so in 2007 with the assistance of an attorney who specializes in business formations of this nature. The property titles were quit claimed to the LLC at that time. Each partner owns "units" in the LLC. The operating agreement clarifies what to do in the event of the death of a partner or in the event a partner wants to sell their "membership interest" and "economic interest" in the LLC.

At this juncture, my sister-in-law wants to leave the partnership and invest her money in other real estate holdings with her sons. She will be selling her "membership interest" and "economic interest". She has consulted with a financial planner and he told her what information she needs to have for tax purposes and other financial planning purposes. She then made this request:

"I have to have copies of all old schedules of depreciation, improvements, and the years we changed percentage of ownership." 

This is complicated, because prior to 2007 the records were not well kept. Many years ago our tax preparer created a depreciation schedule for each property, as best he could, with the information we could provide. Our tax preparer died in 2015, and with him some of the memory about the records and how they were produced, although we do have clear records from recent years. The Duplex was purchased in 1979 by Dad (and Mom) and partial interest in it was later sold to the two sons (and their wives). The house next door was purchased in 1995. The shares were originally uneven: Dad/Mom (2/5 share), #1 Son/Wife ( 1/5 share), #2 Son/Wife (2/5 share). After the death of Son #1 in 2006 and prior to the formation of the LLC in 2007, we decided to change the percentage of ownership to Dad/Mom (1/3), #1 Son's Widow (1/3), #2 Son/Wife (1/3), via some other property exchanges. Here's how I fit in here... Dad/Mom are my father-in-law and mother-in-law, #1 Son's Widow is my sister-in-law, #2 Son is my husband.

From my understanding of the LLC operating agreement, my sister-in-law will be selling her interest in the business, her "units", at a price we agree upon, based primarily on the current fair market value of the properties. The remaining partners have first right to buy her interest and intend to do so. The properties will not be sold and no title transfer is necessary, as they are held in the LLC and will remain so. No mortgages or other encumbrances exist on these properties. Why do you think a financial planner would tell her she needs more details about the properties, such as depreciation and improvement information from the distant past? She mentioned "stepped up basis value at the time of her husband's death" but Executor Deed transfers occurred in early 2007 a few months after the death of her husband. She also mentioned she wants to do a 1031 Exchange by using her share to buy into another property with her son, but it seems to me that would not apply here. Am I missing something?