Tom, my client was a partnership (Tier 1) that had an ownership interest in another partnership (Tier 2). A partner in Tier 1 passed away and Tier 2 sold property at a huge gain the next year . The preparer of the Tier 2 1065 did not include any information for the 743(b) adjustment attributed to the deceased partner of Tier 1.
That was a challenge but the extra work (and billing fees) in coming up with the 743(b) adjustment was rewarding...... the heirs of the deceased partner of Tier 1 received a huge reduction of the 1231 gain and unrecaptured 1250 gain that was on the Tier 2 K-1 saving large amounts of both Federal and State income taxes. Also there was additional depreciation in the form of Section 754 for the remaining properties of Tier 2. Bottom line, Section 754 and 743(b) can be a tremendous hidden tax-savings opportunity in two tier situations when there is a death of a partner.
In the example you provided, we have the $200,000 basis adjustment and the corresponding amortizable asset. when the $200,000 is amortized, does that amortization stay with David, or do all three partners share in that amortization?
Tom, my client was a partnership (Tier 1) that had an ownership interest in another partnership (Tier 2). A partner in Tier 1 passed away and Tier 2 sold property at a huge gain the next year . The preparer of the Tier 2 1065 did not include any information for the 743(b) adjustment attributed to the deceased partner of Tier 1.
That was a challenge but the extra work (and billing fees) in coming up with the 743(b) adjustment was rewarding...... the heirs of the deceased partner of Tier 1 received a huge reduction of the 1231 gain and unrecaptured 1250 gain that was on the Tier 2 K-1 saving large amounts of both Federal and State income taxes. Also there was additional depreciation in the form of Section 754 for the remaining properties of Tier 2. Bottom line, Section 754 and 743(b) can be a tremendous hidden tax-savings opportunity in two tier situations when there is a death of a partner.
Thank you for the example!
In the example you provided, we have the $200,000 basis adjustment and the corresponding amortizable asset. when the $200,000 is amortized, does that amortization stay with David, or do all three partners share in that amortization?
It stays with David.