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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12505
Experience:  Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
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Members of a rental real estate LLC gifted their own interests

Resolved Question:

Members of a rental real estate LLC gifted their own interests in this LLC to their Family Generation Skipping Trusts on 11/15/2012.
Appraisal value of the gifts on the day gifts transferred to Trusts are less than adjusted basis of donors/LLC members.
Form 709 prepared based on the FMV of the gifts which are equal to appraised values.
Does it necessary to post any adjusting entries in LLC books to make appraised values equal to book value?
Submitted: 10 months ago.
Category: Tax
Expert:  Megan C replied 10 months ago.

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

How are you today?

Customer:

Fine

Megan C :

That's great. I understand you would like to know whether or not to adjust the basis of your assets in the LLC's record to match the gift amount

Customer:

correct

Megan C :

It is not necessary to write down the value of the assets on the LLC's books

Megan C :

Wait - did they gift the actual asset, or is now the LLC part of the trust?

Customer:

Yes, they gift their interests in LLC.,i.e., they are out and Trusts are new members of LLC since 11/16/2012

Megan C :

Okay I was thinking that the assets themselves were gifted. In that case, the basis must be reduced to the FMV

Megan C :

And you would depreciate based on that amount now

Customer:

How? what is(are) the adjustment(s). Basis adjusted against what account in book?

Megan C :

You would adjust the assets and then equity

Customer:

Show me the entries.

Megan C :

Dr individual asset account cr retained earnings

Megan C :

Do you have any further questions?

Customer:

What if retained earnings is already has Zero balance.

Megan C :

Then it goes to a debit balance

Customer:

I will try your suggestion and then rate you.

Megan C :

Please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today

Customer:

Thanks.

Megan C :

You're welcome

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12505
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and other Tax Specialists are ready to help you
Expert:  Megan C replied 10 months ago.

Thanks for the opportunity to assist. I've enjoyed working with you today. Please let me know if I can assist further, and if not please rate my response as "excellent" so that I may receive credit for assisting you today.

Expert:  Megan C replied 10 months ago.
Ismail,

I did some more research, and if your LLC is taxed as a partnership, then transfer of interests from one party to another does not trigger any change inside a partnership unless an election is made.

So, the entry may not even be required. You can read more, here:

http://www.nysscpa.org/cpajournal/2005/205/essentials/p50.htm

Thanks!

Megan
Expert:  Megan C replied 10 months ago.
Thanks for allowing me the opportunity to help you. Please let me know if I can be of any further assistance to you in this matter. I really enjoyed working with you – please feel free to request me again when you come back to ask another question. Simply enter "MyVirtualCPA" in the subject of your question Thanks again for being a JustAnswer customer

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