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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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Is the section 754 depreciation adjustment allocated to all

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Is the section 754 depreciation adjustment allocated to all partners, or just the partner inheriting a decendent's partnership interest?

DearCustomer

 

Thank you for your question.

 

What kind of partnership is this? family partnership, LLC, or simpy a proprietorship?

 

Tenants in common, etc?

Customer: replied 7 years ago.
LLC. The decedent had a trust, and the trust is the new partner (or member) of the LLC.

Dear chuck,

 

The person who inherits the partnership interest is the one who is entilted to the adjustment to basis.

 

Reference this lift from regulatory guidance:

 

id="trln">The Sec. 754 Election

Subchapter K offers a tax advantage when a successor to a decedent's partnership interest receives a basis step-up to fair market value (FMV) under Sec. 1014(a). If a Sec. 754 election is made, the successor partner can increase his share of the basis of partnership assets (i.e.,"inside" basis) by the difference between the stepped-up basis of his partnership interest (i.e.,"outside" basis) and the partnership's (lesser) basis in its individual assets. This basis increase is for the benefit of the inheriting partner only; other partners are unaffected.

 

However, in some situations the partnership may elect out of section K.

 

Please access this link and query 754 http://www.irs.gov/irb/2005-20_IRB/ar09.html

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