Recaptured Depreciation

I read somewhere that a partnership can shift out an asset to a partner at book value as opposed to a C-corp where everything has to be done at arms length.



Suppose I hold a property in an LLP and let the house depreciate fully all the way to $0 and then buy the property personally for $1.



If I hold on to the property for a year and a day will i then get taxed the long term capital gains rate of 15% on the whole property or will I incur panealties on the recapture of what the property depreciated while it was held by the partnership?

Comments(1)

  • NewKidInTown317th August, 2007

    You need to consult your CPA. It is my understanding that contributions of capital assets to a partnership are done at cost basis. Withdrawals or distributions of a capital asset to a partner are done at FMV.

    Your CPA will have to tell you how the unrecaptured depreciation is handled.

    Let us know what you find out.

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