A $2.5 million basis increase can include a basis reduction.

A $2.5 million basis increase can include a basis reduction.

In this family partnership, the inherited interest produces a $2.5 million net adjustment. But the heir’s adjustment also reduces basis in the property with a built-in loss. You cannot select only the favorable adjustments.

A qualifying distribution of that property before death can move basis to the appreciated parcels. It also changes the family’s ownership percentages. Compare the two paths while there is still time to change which assets the parent owns.

The example in today's Daily Tax Planning Strategy shows how a property distribution can change the result of a Section 754 election.

#Tax #TaxPlanning #FamilyOffice