Property Transfer

[rcarmarkcpa]

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

[Terry53029]

Sounds like a gift ? 709 

[BobKamman]

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.  

[sjrcpa]

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