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?
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.