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<DIV>I would also comment that collections had difficulty in employment tax
cases in pursuing a sole member for 941 defaults by the LLC if the LLC owned
substantial equipment or inventory but the sole member was thin on assets and
may have had other people own title to personal assets. It took
legislation to say that in the case of employment taxes the LLC is the employer
and therefore its assets are subject to execution. I think disregarded
means just that.</DIV>
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<DIV style="font-color: black"><B>From:</B> <A title=eric@tnguyenlaw.com
href="mailto:eric@tnguyenlaw.com">Eric Reutter</A> </DIV>
<DIV><B>Sent:</B> Tuesday, July 25, 2017 6:20 PM</DIV>
<DIV><B>To:</B> <A title=wsbapt@lists.wsbarppt.com
href="mailto:wsbapt@lists.wsbarppt.com">wsbapt@lists.wsbarppt.com</A> </DIV>
<DIV><B>Subject:</B> [WSBAPT] Step up in basis with a Single-Member LLC owning
realproperty</DIV></DIV></DIV>
<DIV> </DIV></DIV>
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<DIV dir=ltr>Hi all,
<DIV> </DIV>
<DIV>I stumbled across a fascinating tax issue today when researching a matter
for a client. The facts are very simple:</DIV>
<DIV> </DIV>
<DIV>Client wants to use a single-member LLC to own real property. </DIV>
<DIV> </DIV>
<DIV>In doing my due diligence, I want to confirm that client's real property
will receive a 1014 'step-up' in basis when the client dies (as would be the
case if the client herself owned the real property).</DIV>
<DIV> </DIV>
<DIV>Simple research project right? Not quite. It turns out, after reviewing
forum postings and law review articles, that there is a current debate raging on
this very point. Some practitioners believe that the basis of LLC interest
itself receives a 1014 basis step up (the outside basis), while other
practitioners believe that the underlying asset itself, the real estate, would
receive a 1014 step up in basis (the inside basis).</DIV>
<DIV> </DIV>
<DIV>A <A
href="http://if revenue ruling 99-5 governs, then the smllc assets/">2016
Article</A> from the Marquette law review aptly titled "Issues Arising upon the
Death of the Sole Member of a Single-Member LLC," sums up the current rift in
opinions, explaining that:</DIV>
<DIV> </DIV>
<DIV>
<P style="FONT-SIZE: 11pt; FONT-FAMILY: calibri; MARGIN: 0in"><SPAN
style="BACKGROUND: yellow">If Revenue Ruling 99-5 governs, then the SMLLC assets
are deemed transferred, and those assets receive the step-up in basis provided
by § 1014</SPAN> of the Internal Revenue Code.215 <SPAN
style="BACKGROUND-COLOR: rgb(255,255,0)">If, however, Pierre’s rationale can be
imported to the transfer-on-death context, the transfer of an SMLLC interest
might be treated as a transfer of the ownership interest, not the underlying
assets (contrary to the rationale of Revenue Ruling 99-5)</SPAN></P></DIV>
<DIV> </DIV>
<DIV>Could the answer to my question about whether the real estate owned in the
SMLLC receives a step up in basis at the LLC owner's death really be "to be
determined?" It is hard for me to imagine that this issue is unresolved, since
so many people own real property in a single member LLC. </DIV>
<DIV> </DIV>
<DIV>If anyone can clear this question up, it would be the members of this
listserv. As always, I appreciate any insight. </DIV>
<DIV> </DIV>
<DIV>Best regards,</DIV>
<DIV>
<DIV> </DIV>
<DIV>
<DIV class=gmail_signature>
<DIV dir=ltr><FONT style="FONT-SIZE: 12px; FONT-FAMILY: arialmt"
color=#008cb4><B>Eric Reutter, J.D., LL.M.</B></FONT><SPAN
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