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Level 3
July 7, 2025

Struggling with 754 election and 743(b) adjustment on 1065

  • July 7, 2025
  • 0 replies
  • 10 views

I am a solo practitioner and this is my first time ever dealing with this situation. One member of a 50-50 partnership died July 2024. His wife inherited his partnership interest. The partnership owns a commercial rental property so I'm making a 754 election to step up her basis in the building and land to FMV at date of death.

I created two new fixed assets called "754 - Land" and "754 - Building" since the wife will get additional depreciation on the stepped up value of the building. I allocated the 743(b) adjustment to the wife using the Special Allocations screen. However, this throws off the profit allocated to each partner on the K-1 and I can't figure out why. It decreases her profit and increases the profit of the other two partners. Schedule L is also off by the total increase in the basis of the assets. 

I'm also trying to figure out how to properly show the 743(b) adjustment on the wife's K-1 (I believe it's box 13 code V or U). 

Apologies that this is kind of all over the place, but I'm open to any and all help!