"Gene E. Utterback, EA" <eagent[at]alliancetax.com> wrote:

- quote -

Not to mention 754 and 743 elections, hot assets, and other
interesting stuff. It's why no partnership with changes in
ownership is ever simple. But they're challenging and fun to
work on.

The investment advisor for one of my clients, trying to
maximize his returns, put him into (and then out of -
sometimes within a month or so) quite a few PLPs last year.
That took a bit of time to calculate ordinary gain,capital
basis, etc. off of the new K-1's and the ownership schedules
they provide. And of course I had to include all those
Section 754 and 751 statements in the return. It's amazing
how many different places the PLPs can put the small print
reference to them (and not all of them had 754s). One of
them also wanted my client to file a Canadian T-1 (for
$CDN25!) I suggested to him that if he wanted to invest in
these, make a big enough investment and hold them long
enough that my fees wouldn't eat up the returns.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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"Allan Martin" <Allan[at]Ua-Corp.com> wrote:

- quote -


OOOOOhhhh! Don't you just love "inside and outside basis"
issues?

On the company books - debit real property $2M and credit
member's capital $2M.

For the member, it's not nearly as simple. You have to
track his outside basis so you can properly trace
distributions and determine their taxability and you have to
be able to calculate any gain to the member on the
contribution, which will be impacted by any associated
liability that the LLC assumes or whatever the member gets
if he gets out early and gets back something different that
what he put it.

Inside basis is usually pretty straight forward.

Outside basis in usually pretty tricky and requires a good
working knowledge of the rules. We get a few new LLCs each
year and I think I understand partnership taxation as well
as anyone and I STILL have to keep looking the rules for
outside basis and gain calculation.

Gene E. Utterback, EA, RFC

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One of the partners in a newly formed LLC contributes real property with a
fair market value of 2 million and an adjusted basis of only 1 million. What
is the best way of recording this transaction?

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