rcarmarkcpa
Level 2
‎02-06-2025 10:11 PM

A son wants to Transfer Commercial  Real Estate  to his father . The property is in a Single Member  LLC.  The property has an Appraised value of $ 1.3 million. It has a mortgage on it for $ 1.6 million.  The property has a cost of $ 1,650,864 and 286,232 of Depreciation has been taken on it so its basis is $ 1,364,632. The bank is amenable to the father picking up the $ 1.6 million.  Wouldn't the son have a deemed sale and a gain of $ 1,600,000 - $ 1,364,632= $ 235,368? Wouldn't the father have a basis of $ 1,600,000 in the property? Thanks

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Terry53029
Level 15
Level 15
‎02-08-2025 11:37 AM

Sounds like a gift ? 709 

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BobKamman
Level 15
‎02-08-2025 11:45 AM

Who would be filing the 709?  Maybe the property value has declined to $1.0 million and the father is helping out the son by taking it off his hands.  

I think @rcarmarkcpa is on the right track, noting that the son has to pick up income from depreciation recapture because the mortgage exceeds the basis.  But this sounds like a college quiz question, so there might be a catch.  On the other hand, it might just be am honest test of what freshman accounting students have learned.  

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sjrcpa
Level 15
‎02-08-2025 01:20 PM

Does it make a difference if ownership of the SMLLC is given to the father, instead of the real estate?


The more I know the more I don’t know.
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