Handling of a Section 754 Election on a 1065

Forum|Forum|1 year ago
April 9, 2025
1 reply
10 views

I have an LLC that lost 1 of its 3 partners, and the remaining 2 partners bought out the deceased partner's interest. They have elected Section 754 handling of the step up in basis.

Anyone know the guidelines on depreciation method, convention, etc? Pro Series seems to be fairly rigid on what I can select. I'd like to use SL and allow a full year depreciation in year one, if I can, but I'm getting errors.

Thanks for any input!

ProSeries Professional

This topic has been closed for replies.

dascpa

Level 11

Assume you have only 1 asset on the books. With th 754 you now have 2. The original and the step-up. The step-up date in the date of death so you do no get an entire year's depreciation unless they died on 01/01. But even then, depending upon the asset regular conventions are used. For example, 39 yr commercial real estate, 15 yr land improvements. Since these assets are typically straight-line you can use them. If a cost-seg was done at the time of the 754 appraisal you can get more accelerated depreciation on those assets. Realize, intangible assets are not stepped-up. I use Fixed Asset Manager and anytime I have a step-up I create a 2nd fixed asset file and do not import it. I used the bottom line depreciation number to enter onto the K-1 as a 754 transaction.

D

DarinB7493Author

Level 3

Thanks @dascpa! Appreciate your input. Just a quick follow-up:

My client is a logging company so most of its assets are 7-yr equipment. I was under the impression that this 'second' asset would have to be SL convention, but if 200DB HY is acceptable, I'm pretty sure the partners would be in favor of that! 😉

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