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<div>I was thinking that section 2701 just had to do with valuing assets that were given by one family member to others. If there were no gifts, then I would think that section 2701 would not apply?</div>
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On Feb 6, 2017, at 12:02 PM, Josh Grant <<a href="mailto:jgrant@accima.com">jgrant@accima.com</a>> wrote:<br>
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<div><font size="4">I have an estate with an LLC with A and B units. Decedent owned about 25%. All the members have the same % of A and B units. There is no fixed rate dividend. There has been no gifting. Should we show/report the value as 0% for A units
and all value in the B units?</font></div>
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<div style="font-color: black"><b>From:</b> <a title="D.Sweeney@smithzuccarini.com" href="mailto:D.Sweeney@smithzuccarini.com">
David Sweeney</a> </div>
<div><b>Sent:</b> Saturday, February 04, 2017 2:53 PM</div>
<div><b>To:</b> <a title="wsbapt@lists.wsbarppt.com" href="mailto:wsbapt@lists.wsbarppt.com">
WSBA Probate & Trust Listserv</a> </div>
<div><b>Subject:</b> Re: [WSBAPT] Gifting of LLC Interest and 754 Election</div>
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<p class="MsoNormal"><span style="FONT-SIZE: 11pt; FONT-FAMILY: "Calibri",sans-serif; COLOR: #1f497d">Unless the Class A units have a dividend determined at a fixed rate, under Sec. 2701, would the value of the Class A units be determined to be zero, so that
all of the value was transferred with the gifts of the Class B units? This would just go to the value to be reported on the gift tax returns.<o:p></o:p></span></p>
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<span style="COLOR: #1f497d">David B. Sweeney <br>
Smith & Zuccarini, P.S. <br>
2155-112th Avenue NE <br>
Bellevue, Washington 98004 <o:p></o:p></span></p>
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<p class="MsoNormal"><span style="COLOR: #1f497d">Telephone: 425-453-4455 <br>
Direct Line: 425-990-1586 <br>
Facsimile: 425-453-4454 <br>
<a title="mailto:D.sweeney@smithzuccarini.com" href="blocked::mailto:D.sweeney@smithzuccarini.com"><span style="COLOR: black">E-mail:D.sweeney@smithzuccarini.com</span></a>
<br>
<a title="http://www.smithzuccarini.com/" href="http://www.smithzuccarini.com/">www.smithzuccarini.com</a>
</span><span style="FONT-SIZE: 11pt; FONT-FAMILY: "Calibri",sans-serif; COLOR: #1f497d"><o:p></o:p></span></p>
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<p class="MsoNormal"><b><span style="FONT-SIZE: 11pt; FONT-FAMILY: "Calibri",sans-serif">From:</span></b><span style="FONT-SIZE: 11pt; FONT-FAMILY: "Calibri",sans-serif">
<a href="mailto:wsbapt-bounces@lists.wsbarppt.com">wsbapt-bounces@lists.wsbarppt.com</a> [<a href="mailto:wsbapt-bounces@lists.wsbarppt.com">mailto:wsbapt-bounces@lists.wsbarppt.com</a>]
<b>On Behalf Of </b>John J. Sullivan<br>
<b>Sent:</b> Saturday, February 04, 2017 2:04 PM<br>
<b>To:</b> WSBA Probate & Trust Listserv <<a href="mailto:wsbapt@lists.wsbarppt.com">wsbapt@lists.wsbarppt.com</a>><br>
<b>Subject:</b> Re: [WSBAPT] Gifting of LLC Interest and 754 Election<o:p></o:p></span></p>
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<p class="MsoNormal">It wouldn't. <br>
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Sent from my iPhone<o:p></o:p></p>
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On Feb 4, 2017, at 12:13 PM, Jennifer Sohn <<a href="mailto:jennifer@sohn-law.com">jennifer@sohn-law.com</a>> wrote:<o:p></o:p></p>
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<p class="MsoNormal">Thanks for the input... I don't think the management structure would pose a problem in this case. But, I am not understanding the 754 issue. In a gift, the basis is carried over, and 754 is an election to step-up basis which does not apply
here. I am not sure how the 754 would invalidate the gift?<o:p></o:p></p>
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Best regards,<o:p></o:p></p>
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<p class="MsoNormal"><o:p></o:p> </p>
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<p class="MsoNormal">Jennifer Sohn<o:p></o:p></p>
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<p class="MsoNormal">206.617.7874<o:p></o:p></p>
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On Feb 4, 2017, at 10:13 AM, John J. Sullivan, Esq. <<a href="mailto:sullaw@comcast.net">sullaw@comcast.net</a>> wrote:<o:p></o:p></p>
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<p class="MsoNormal"><span style="FONT-SIZE: 11pt; FONT-FAMILY: "Calibri",sans-serif">What the CPA may be thinking of is that the management structure may render the gifts not of “present interests” denying the donor annual exclusion.
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I would be very reluctant to consider rescinding the gifts retroactively. </span>
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<p class="MsoNormal"><span style="FONT-SIZE: 11pt; FONT-FAMILY: "Calibri",sans-serif">There is a Sec. 754 issue, but I’m not convinced it applies here.
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<a href="http://www.thetaxadviser.com/issues/2008/jun/handlinggiftsandbequestsofllcinterests.html">http://www.thetaxadviser.com/issues/2008/jun/handlinggiftsandbequestsofllcinterests.html</a></span><o:p></o:p></p>
<p class="MsoNormal"><span style="FONT-SIZE: 11pt; FONT-FAMILY: "Calibri",sans-serif"> </span><o:p></o:p></p>
<p class="MsoNormal"><span style="FONT-SIZE: 11pt; FONT-FAMILY: "Calibri",sans-serif">John J. Sullivan</span><o:p></o:p></p>
<p class="MsoNormal"><span style="FONT-SIZE: 11pt; FONT-FAMILY: "Calibri",sans-serif"> </span><o:p></o:p></p>
<p class="MsoNormal"><b><span style="FONT-SIZE: 11pt; FONT-FAMILY: "Calibri",sans-serif">From:</span></b><span style="FONT-SIZE: 11pt; FONT-FAMILY: "Calibri",sans-serif">
<a href="mailto:wsbapt-bounces@lists.wsbarppt.com">wsbapt-bounces@lists.wsbarppt.com</a> [<a href="mailto:wsbapt-bounces@lists.wsbarppt.com">mailto:wsbapt-bounces@lists.wsbarppt.com</a>]
<b>On Behalf Of </b>Jennifer Sohn<br>
<b>Sent:</b> Friday, February 3, 2017 11:24 PM<br>
<b>To:</b> WSBA Probate & Trust Listserv <<a href="mailto:wsbapt@lists.wsbarppt.com">wsbapt@lists.wsbarppt.com</a>><br>
<b>Subject:</b> [WSBAPT] Gifting of LLC Interest and 754 Election</span><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
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<p class="MsoNormal">Hi, I have client (a married couple) who own a building through an LLC. The LLC interests consist of Class A and Class B units, Class A having voting and management rights and Class B having none. Over the last couple of years, they made
2 substantial gifts of the LLC interest to their 2 children, which resulted in them gifting 98% of LLC interests (all of which were Class B units) and the clients retaining Class A units. The children received actual distributions based on their percentage
interests and paid income taxes on them.<o:p></o:p></p>
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<p class="MsoNormal"> <o:p></o:p></p>
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<p class="MsoNormal">For some reason, their CPA had never filed the gift tax returns, and they are currently in the process of filing them. The CPA is telling me that I need to un-do the gifts, because they will be deemed incomplete under Section 754. I am
not sure how Section 754 applies to this type of gifting situation. (Based on my understanding, Section 754 refers to an election to step-up the basis of assets within a partnership when there is a distribution of partnership property (which is not the case
here) or a transfer/sale or exchange of an interest by a partner (which also is not the case here)). I am not quite understanding how the inability to make the Section 754 election can make the gift incomplete?<o:p></o:p></p>
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<p class="MsoNormal"> <o:p></o:p></p>
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<p class="MsoNormal">I understand that the children will not get the benefit of the step-up basis because they were gifts and not sales, which would result in higher capital gains tax for the children. However, the clients did not want to structure them as
sales, and without these gifting, his estate tax liability would be significantly higher (as he has a taxable estate).<o:p></o:p></p>
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<p class="MsoNormal"> <o:p></o:p></p>
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<p class="MsoNormal">In any case, before I pick up the phone and talk to the CPA, I just wanted to see if I was missing something about the 754 election and gifting in this context. Any input would be welcome.<o:p></o:p></p>
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<p class="MsoNormal"> <o:p></o:p></p>
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<p class="MsoNormal">Thanks.<o:p></o:p></p>
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<p class="MsoNormal">-- <o:p></o:p></p>
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<p style="MARGIN: 0in 0in 0pt"><span style="FONT-SIZE: 10pt; FONT-FAMILY: "Georgia",serif; COLOR: black">Best regards,</span><o:p></o:p></p>
<p style="MARGIN: 0in 0in 0pt"><span style="FONT-SIZE: 10pt; FONT-FAMILY: "Georgia",serif; COLOR: black"> </span><o:p></o:p></p>
<p style="MARGIN: 0in 0in 0pt"><span style="FONT-SIZE: 10pt; FONT-FAMILY: "Georgia",serif; COLOR: black">Jennifer Y. Sohn</span><o:p></o:p></p>
<p style="MARGIN: 0in 0in 0pt"><span style="FONT-SIZE: 10pt; FONT-FAMILY: "Georgia",serif; COLOR: black">Attorney at Law</span><o:p></o:p></p>
<p style="MARGIN: 0in 0in 0pt"><span style="FONT-SIZE: 10pt; FONT-FAMILY: "Georgia",serif; COLOR: black">(Licensed in CA and WA)</span><o:p></o:p></p>
<p style="MARGIN: 0in 0in 0pt"><span style="FONT-SIZE: 10pt; FONT-FAMILY: "Georgia",serif; COLOR: black">Sohn Law PLLC</span><o:p></o:p></p>
<p style="MARGIN: 0in 0in 0pt"><span style="FONT-SIZE: 10pt; FONT-FAMILY: "Georgia",serif; COLOR: black">10900 NE 4th Street, Suite 1850</span><o:p></o:p></p>
<p style="MARGIN: 0in 0in 0pt"><span style="FONT-SIZE: 10pt; FONT-FAMILY: "Georgia",serif; COLOR: black">Bellevue, WA 98004</span><o:p></o:p></p>
<p style="MARGIN: 0in 0in 0pt"><span style="FONT-SIZE: 10pt; FONT-FAMILY: "Georgia",serif; COLOR: black">Tel: 425.522.3861</span><o:p></o:p></p>
<p style="MARGIN: 0in 0in 0pt"><span style="FONT-SIZE: 10pt; FONT-FAMILY: "Georgia",serif; COLOR: black">Fax: 425.732.9748
</span><o:p></o:p></p>
<p style="MARGIN: 0in 0in 0pt"><span style="FONT-SIZE: 10pt; FONT-FAMILY: "Georgia",serif; COLOR: black">Email:
<a href="mailto:jennifer@sohn-law.com" target="_blank"><span style="COLOR: #0563c1">jennifer@sohn-law.com</span></a></span><o:p></o:p></p>
<p style="MARGIN: 0in 0in 0pt"><span style="FONT-SIZE: 10pt; FONT-FAMILY: "Georgia",serif; COLOR: black"><a href="http://www.sohn-law.com/" target="_blank"><span style="COLOR: #0563c1">http://www.sohn-law.com</span></a></span><o:p></o:p></p>
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