Step Up in Basis at Death for LLC-owned Real Estate

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Step Up in Basis at Death for LLC-owned Real Estate

Mark S.Pro Member
Rental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes

How does the IRS view a step-up in basis at death on a rental property that is owned by an LLC (single member LLC in Kentucky if that matters)?

Let’s say I acquire the rentals in my personal name, transfer to my SMLLC, and die. How does that affect whether or not my heirs get a step-up in basis?

I'm assuming if I held them in my personal name, heirs would get step up in basis at my death but not if they're owned by the LLC. Is this correct?

Can someone walk through a simple example of each scenario with numbers?

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  • Lance LvovskyPro Member
    Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
    7y

    @Mark S.

    Generally a step up in basis would apply. Section 754 basis step up is an election for llc/partnerships. Speak to a CPA who can gather all your specific facts and advise accordingly. Best if the CPA understands estate and succession planning.

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    7y

    @Mark S.

    It gets a little tricky with the involvement of the LLC.

    Because there is basis in the LLC and the LLC's basis in the assets owned by the LLC.

    There should be a step up in basis in the units of the LLC.

    Something to look into if you need to do a 754 election since it is a single member LLC.

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  • Mark S.Pro Member
    OP
    Rental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes
    7y

    Thanks @Basit Siddiqi and @Lance Lvovsky   

    Just wondering if maybe I overlooked a possible estate planning item in favor of being more focused on asset protection. 

    Hopefully nothing to worry about for a long time (well - never, really, because I’ll be dead!).  I’ll ask @Michael Plaks’ team on my next call with them in a couple weeks. 

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