Level 3

Property Transfer

Forum|Forum|1 year ago
February 7, 2025
2 replies
21 views

A son wants to Transfer Commercial Real Estate to his father . The property is in a Single Member LLC. The property has an Appraised value of $ 1.3 million. It has a mortgage on it for $ 1.6 million. The property has a cost of $ 1,650,864 and 286,232 of Depreciation has been taken on it so its basis is $ 1,364,632. The bank is amenable to the father picking up the $ 1.6 million. Wouldn't the son have a deemed sale and a gain of $ 1,600,000 - $ 1,364,632= $ 235,368? Wouldn't the father have a basis of $ 1,600,000 in the property? Thanks

T

Terry53029

Intuit Community Champion

Sounds like a gift ? 709

BobKamman

Level 15

Who would be filing the 709? Maybe the property value has declined to $1.0 million and the father is helping out the son by taking it off his hands.

I think @rcarmarkcpa is on the right track, noting that the son has to pick up income from depreciation recapture because the mortgage exceeds the basis. But this sounds like a college quiz question, so there might be a catch. On the other hand, it might just be am honest test of what freshman accounting students have learned.

sjrcpa

Level 15

Does it make a difference if ownership of the SMLLC is given to the father, instead of the real estate?

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

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