From a CPA:

Subject: Death of A Partner

Dear Tax Guru...

Re your reply to the 2/14/06 Death of A Partner question:

 

       The person asking the question needs to  be made aware of the IRC Code 754 election that may apply in this situation.

My reply:

 That's a very good point. 

I will got some info on that posted soon.

Thanks for writing.

Kerry Kerstetter

 

Additional Info:

Proving again why no one reference book can be all things for all people, I compared the info included in both The TaxBook and the Small Business QuickFinder and have to give the nod to QF for including a lot more info on Section 754 than the brief summary in The TaxBook, such as the following quotes from the new QF Online Service, where they have the same content as in the books:

Optional Adjustment to Basis of Partnership Property (Section 754 Election)

Section 754 Election Because of differences between basis and FMV of assets in a partnership, inequities can result when partnership interests are sold or transferred.

Under a Section 754 election, the purchaser’s basis in partnership property is adjusted to reflect the purchase price and the partnership interest. This reduces negative tax effects when basis in acquired partnership property is less than the amount paid for the partnership interest.

Gain upon liquidation of a partner’s interest may occur from a Section 754 election. The election is used to remedy the negative tax consequence when an amount paid for a partnership interest is greater than the partnership’s basis in its assets. Since the election can increase the partner’s ability to deduct depreciation on partnership property, the gain upon liquidation of the partner’s interest may also be increased.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/20/2006 04:34:00 PM Send this post: