Step Up Basis

[Randall]

Elderly man, no spouse. Will has everything going equally to children.

Puts real estate in LLC, single member. Dies. Is LLC dissolved? Property to estate?. Step up basis to estate/beneficiaries?

Puts real estate in a trust. Irrevocable grantor trust. Dies. Trust becomes irrevocable. Does trust get step up basis of property? Or is basis the grantor's basis when property is put in trust while grantor is still living?

If they really just want to sell the property and distribute the money, why do a trust? Just keep property in Father's name or go with a single member LLC.

Any comments on advantages or disadvantages?

Randall J. Buys, CPA

Erlanger, KY

[jainen]

>>Any comments on advantages or disadvantages?<<

There are entire books on this topic. No single answer is best for every combination. You need to work it out with the client, probably including subjective elements.

For your technical question of basis, property gets a step-up if it is included in the taxable estate. (That's not the same as a probate estate.) Basis step-up is not always a good thing.

[Terry D EA]

I agree with Jainen that no single answer is best. i am assuming the property is held for rental?? If so, it is best to work it out with your client. Maybe involving an estate attorney might not be a bad idea either,

[kcjenkins]

Jainen is right, this series of questions do not have single answers. LLC for example, depends on state involved, as well as how the LLC Articals of Organization is written, etc.

[Randall]

Nothing's been done yet. Will be meeting with client and attorney soon. My first concern is losing step up basis by moving the property into an entity and out of the individual's name. Father is old and dying and children want the property sold and distribute the money. At least from my preliminary understanding.