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Ed Johnson, Tax Preparer
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Is the section 754 depreciation adjustment allocated to all

Resolved Question:

Is the section 754 depreciation adjustment allocated to all partners, or just the partner inheriting a decendent's partnership interest?
Submitted: 5 years ago.
Category: Tax
Expert:  Ed Johnson replied 5 years ago.

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 5 years ago.
LLC. The decedent had a trust, and the trust is the new partner (or member) of the LLC.
Expert:  Ed Johnson replied 5 years ago.

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:

 

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

Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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Ed Johnson
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GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee