gift, inheritance or sale?

[mgmea]

Final note.

All the llc distributions went into the parents account for support of parents.

Linda and buddy

This keeps getting better all the time for the stepped up basis. It sure looks like the parents retained an income interest in the cropland, doesn't it? Lets step that basis up too.

From what has been presented in this post by the OP it looks to me like the parents were counseled by someone experienced in transferring assets to qualify for Title 19 and get a stepped up basis for these assets at the same time. Can the OP talk to whoever set this stuff up for them? Ask the LLC return preparer if they are familiar with Sec 2036 and 1014. If the LLC return preparer thinks the $1 sale price on the deed makes this a bonafide sale they are in over their head. I'd ask them what reasoning they used if they didn't conisder this a transfer subject to Sec 2036. There may be a fatal flaw in here somewhere that we aren't aware of which doesn't make this transfer subject to Sec 2036. Please keep us posted.

PS: I believe there is something in the regulations for Sec 1014 that the stepped up basis is adjusted for depreciation taken. You'll have to check out what depreciation this is, I think it is depreciation taken by the donee(the LLC) after the transfer, but I'm not sure.

[ljwalters]

I have talked to the preparer of the K1 and he won't budge, his only reason is he THINKS he is RIGHT.

Do I have any options since the K1 is where the long term capital gains are reported?

Thanks to everyone

Linda and buddy

PS a little more information.

The original K1 filed with the state includes a basis of $105,807.19 for each of the children. And the operating agreement of the trust specifically states that no party can sell his share with out express written agreement from other share holders. Neither can any share holder add any capital. Reads like a real tight llc to me.