Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

A husband formed an llc and placed 2 rental properties in

Customer Question
it. He gave his wife...
A husband formed an llc and placed 2 rental properties in it. He gave his wife 50% ownership at that time. A few years later he passed away. The wife now wants to sell one property. She wants to figure out her tax burden after the sale. How do you do that?
How do figure the basis, depreciation to recapture etc?
Submitted: 2 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 8 minutes by:
6/7/2015
Tax Professional: ShawnA, CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions. replied 2 years ago
ShawnA
ShawnA, CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.
Category: Tax
Satisfied Customers: 2,884
Experience: CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.
Verified
That depends on what the Llc has done as far as accounting.
I'll offer you a call and after we speak you will have to do some digging and then I'll be able to answer the question.
Ask Your Own Tax Question
Customer reply replied 2 years ago
please explain here as I am not available for phone discussion. The wife was made 50% member in the LLC.
Customer reply replied 2 years ago
the llc was setup as a disregarded entity for tax purposes.
Tax Professional: ShawnA, CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions. replied 2 years ago
That's great. Additional information but it has no relevance.
Ask Your Own Tax Question
Tax Professional: Anne, Master Tax Preparer replied 2 years ago
Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2,439
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
Verified
Hi
Different expert here. I'm Anne and I've been preparing taxes for 27 years,and it will be my pleasure to help you today.
If, when the husband put his wife's name on the LLC, he pretty much "assigned" her 1 of the properties, and he took the other, then figuring the basis is fairly simple.
Her basis in the home that was "hers" doesn't change. However, she would inherit the other house at Fair Market Value on the date of death. (please see IRS Pub 527, page 7, at URL below:
http://www.irs.gov/pub/irs-pdf/p527.pdf
and page 9 of put 551 at URL below:
http://www.irs.gov/pub/irs-pdf/p551.pdf
If this was NOT the way that the LLC was set up, and they had joint ownership for BOTH properties (which is the usual case) you follow the same theory, meaning she would inherit 1/2 of each home at Fair Market Value. A little more complicated, but it can be done.
If you have any questions, please post them here and I'll be notified.
If this has answered your question, please take the moment to rate positive so that I may be given credit for working with you today.
It is only through positive ratings that we are compensated for our time and knowledge
Thank you for choosing justanswer
Ask Your Own Tax Question
Customer reply replied 2 years ago
the two properties were commercial units. the llc had each party as managing agents on the contents of the llc. so they shared responsibiltites., the husband had the properties listed in his name prior to forming the llc with the wife. when the wife sells what happens to the depreciation that the husband took before placing in the LLc and then the amount after the llc formation and the amount taken after his passing. ? what amount does she recapture? Does she have 2 basis amounts? one from her half at the commensament of the llc and another at the time of inheritance?
Tax Professional: Anne, Master Tax Preparer replied 2 years ago
With the absence of proof that she had 1 property and he had 1, she will inherit 1/2 of each property at Fair Market Value (the depreciation he took before he formed the LLC doesn't play into the Fair Market Value price, since she wasn't part of the LLC then) and the other 1/2 of her basis will be the usual, cost plus expenses minus the expense of sale
She technically has 2 TYPES of basis for the properties. One is actual cost (which she will have to take into account 1/2 of the depreciation) and 1/2 is Fair Market Value. Then these are added together to get at the true basis of each property.
She will only have recapture on the half that she does not inherit, which could be little to nothing, since 1/2 of the properties' basis is Fair Market Value.
I hope this helps
I hope this helps
Ask Your Own Tax Question
Tax Professional: Anne, Master Tax Preparer replied 2 years ago
I see that I man not have made ONE piece of information clearly enough. (I generally review my answers if they are not accepted with in a day or so)
The depreciation that he took on the properties before he formed the LLC does not come into play on the 1/2 she inherits, since that will be at Fair Market Price, and that was the half I was speaking about when I stated that it doesn't come into play because it seemed like that was the half we were discussing. Still, I don't want any misinterpretations or for you to have incomplete information, so:
The OTHER half, the half that has to use usual basis of
cost plus capital expenses plus cost of sale less depreciation WILL use the pre LLC depreciation
Please let me know if you have any further questions
Ask Your Own Tax Question
Customer reply replied 2 years ago
the husband had owned the properties for 23 years before he placed them in the joint ownership LLC. Two years afterwards he passed away, leaving the llc to his wife. He purchased in late 1970:s. is it possible he could have depreciated the total amount of both properties to a zero basis? if so, then his depreciation taken would have been forgiven, with the setup basis to FMV, upon the wife inheriting, and she would only be responsible any additional depreciation from the time of the formation of the LLC forward. Is this what your meaning?
Tax Professional: Anne, Master Tax Preparer replied 2 years ago
yes, that is exactly what I meant.
If there is any depreciation taken in 2013 for instance, will give you the information you need.
The house SHOULD have been depreciated under MACRS for 27 1/2 years, so this would be very close to being totally depreciated.
Capital improvements are depreciated over 27 1/2 years also, so it's entirely possible that the properties are carrying depreciation for that, depending on when he made the improvements.
Again, you will have to look at Part III section A of form 4562 to see if there was any depreciation deducted in 2014
I hope this helps
Ask Your Own Tax Question
Ask Anne Your Own Question
Anne
Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2,439
2,439 Satisfied Customers
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses

Anne is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
I have a rental property in Az. It is not an LLC. Has been
I have a rental property in Az. It is not an LLC. Has been rented out for the last 8 months. Income and expenditure have been tracked accurately. What do I need to do to convert it to an LLC in Az now… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
723 satisfied customers
I inherited rental properties. I got an LLC set up using an
I inherited rental properties. I got an LLC set up using an EIN number with a property management who no longet works for me.Can I remove their EIN number? legalgems… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I bought a rental property for 49000 and sold it for 29000
I bought a rental property for 49000 and sold it for 29000 many years later. During those years I depreciated it entirely. So do I it don't I have to pay capital gain on the entire 29000? … read more
abci168
abci168
Principal
27 satisfied customers
My question is about depreciation for rental property. My
Hello. My question is about depreciation for rental property. My rental property had no income during one year. In this case, since there was no income, I do not need to claim depreciation for that sa… read more
Fred Rook
Fred Rook
Corporate Controller
BSBA
31 satisfied customers
My wife inherited a piece of rental property from a
My wife inherited a piece of rental property from a revocable trust that her parents had set up after her father and brother died her mom did an amendment that made her trustee and sole heir. Her mom … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have a rental property that required major repairs this
I have a rental property that required major repairs this year. The repairs minus deductible were covered by my insurance. Is the entire amount of repair an allowable expense or only the insurance ded… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Would owning a second home that is used for rental property
Would owning a second home that is used for rental property income affect VA survivors benefits? Would SSDI income?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,458 satisfied customers
Are you familiar with Capital Gain taxes on rental property?
Are you familiar with Capital Gain taxes on rental property? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I recently received a car as a payment for rental property
Hi, I recently received a car as a payment for rental property and I was wondering how the tax treatment would be … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I purchased a rental property in TY 2016 and I'm filling out
I purchased a rental property in TY 2016 and I'm filling out form 4562 line 42d I don't know what the code sections are. Any ideas? … read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
Disposition of Rental Property. Rental property: Gross sale
Disposition of Rental Property.Rental property : Gross sale price: $600K Cost or Other Basis plus Selling Expenses: $300K Depreciation allowed or allowable: $100K (Form 4797 line 22)Adjustment: $300K … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
In Texas A & single females have several rental properties
In Texas A & B single females have several rental properties in joint tentancy with right of survivorship. The 1099 is under A's SSN. In 2015 rental income was filed under B's federal tax. IRS now all… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I am working on my taxes. I sold a rental property and
I am working on my taxes. I sold a rental property and according to my tax software (TurboTax), I had ~$100k gain. How does this get considered? Is it weighed in with all my gains and losses across my… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,217 satisfied customers
I own rental properties. If I purchased the property in
I own rental properties. If I purchased the property in early 2016, but haven't finished the remodel are marketed it for rental yet (because it's not ready for rental), do I list the property on my 20… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
723 satisfied customers
I didn't claim depreciation on a rental property for 8
I didn't claim depreciation on a rental property for 8 years. I'm about to sell the property. How many years of the past annual depreciation can I claim? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I sold a rental property and fully depreciated furniture and
I sold a rental property and fully depreciated furniture and fixtures such as refrigerator/oven/doors etc. Would I have to recapture the FF&E depreciated amounts as ordinary income with the sale when … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,217 satisfied customers
Last year I used form 4562 to declare my RV and depreciate
Hi, last year I used form 4562 to declare my RV and depreciate it for my business. I am just confused if I use that form again this year or need to use a different form? Thank you for your help! … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
If I'm depreciating a rental property for the first time, do
If I'm depreciating a rental property for the first time, do I have to do it over 27.5 years or can I do it over a shorter time span? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x