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Partner dies. Partnership makes a sec 754 election.

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Partner dies. Partnership makes...

Partner dies. Partnership makes a sec 754 election. Partnership sells acreage. Partner's interest at death is valued based on the sales price of the real estate without any discount. gain reported on the

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On the death of an individual partner, his interest is valued at the price per acre at which the partnership is selling its acreage. No discounts were taken in determining the date of death value of the deceased partner's interest. The partnership has a sec. 754 election in effect. The K-1 for the trust which now holds this interest indicates a capital gain for this partner based on the partnership's inside basis for the property. How do I report this on the fiduciary income tax return for the trust.

Submitted: 4 months ago.Category: Capital Gains and Losses
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Answered in 2 days by:
3/22/2018
Tax Expert: PDtax, CPA firm owner replied 3 months ago
PDtax
PDtax, CPA firm owner
Category: Capital Gains and Losses
Satisfied Customers: 5,085
Experience: Tax professional and business consultant for 34 years
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Hi from Just Answer. I'm PDtax, and can assist.

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Tax Expert: PDtax, CPA firm owner replied 3 months ago

The partnership can report the sale with inside basis, but might consider adding detail on the K-1 about the 754 election. In this case, the trust needs to report the sale as reported by the partnership, then adjust the basis for the 754 election made but not reported by the entity. Report it an an additional sale, $0 proceeds, and the 754 basis step-up as its cost basis. The two would then be netted out on the 1041 Sch. D.

Or, the partnership reports the gain for the trust as partner including the 754 basis step-up. The trust then reports without revision.

I hope that meets your needs. If so, positive feedback, and a bonus if appropriate, are appreciated. Five stars is the best rating. I'm PDtax.

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