Section 743 adjustment needed when p'ship is now SMLLC?

Forum|Forum|2 years ago
August 30, 2023
2 replies
38 views

I have a small partnership with 2 partners; one partner bought the other out on 03/31/22 for $114K. Capital balance for both partners is approx $50k. The only assets are real estate and A/D. My client is the purchasing partner and the p'ship (which is now a SMLLC). I will do the 745 election but do I need the 743 adjustment?

Do I need to file a short year final return? Do I need to file the 8308?

How do I show the sale (depr recapture) for the departing partner on the K-1?

Trying to do this in ProSeries; any tips much appreciated.

Thanks for any help.

ProSeries Professional

This topic has been closed for replies.

sjrcpa

Level 15

Yes you need a short year 1065, ending on the day of the buyout.

Yes you need the 8308.

The sale doesn't show on the K-1, but you can provide the pertinent info in an attached statement.

The more I know the more I don’t know.

T

taosenoAuthor

Level 5

Thanks for your response. I am having problems trying to get the 743 adjustment to flow thru ProSeries.......

sjrcpa

Level 15

Where are you trying to do a 743 adjustment? The Partnership terminated upon the buyout. Remaining owner effectively bought 50% of the assets. On his return you have the 50% he already owned at their adjusted basis + the 50% he bought at the purchase price.

The more I know the more I don’t know.

T

TaxMonkey

Level 7

The 754 election and 743 adjustments are not applicable for SMLLCs.

Per Rev Ruling 99-6 when one partner of a MMLLC purchases all of the interest in the LLC it is a deemed liquadating distribution to all of the members followed by an asset purchase.

In your situation you will have 50% of the assets based on the carry over basis of the LLC and 50% of the assets based on the purchase of the assets from the other partner.

The partner's K-1s will report the liquidating distribution, but nothing regarding the sale. Although it would be helpful for the selling partner to include information regarding the adjusted basis and prior depreciation as a note on the K-1 so they can properly report the sale of assets.

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