Partnership husband and wife 50/50

[jafer3875]

State of South Carolina. Husband and wife had partnership for over 30 years. Partnership was in a revocable trust owned by husband and wife. Terms of trust were that all assets transferred to surviving spouse. The assets held in partnership were land, building and cash. No liabilities owed. In 2015 wife passed away. Husband continued operating business. Need to file short year 1065(which I know is late). Remainder of year will be reported on Husbands 1040 Sch. E(all rental activity). Husband should receive a setup in basis for wife's 50% share of assets. Since all assets automatically transferred to husband do I need to file an election for a step up in basis or does he automatically receive increase in basis due to the inheritance? I have to enter depreciation of assets on partner side calculated for the short year. When the assets are entered on the 1040 side do I enter them as being acquired on the date after the DOD at the net value(purchase price less prior depreciation taken on 1065) or do I enter the original purchase price and then enter the prior depreciation.

 

[tranquility]

State of South Carolina. Husband and wife had partnership for over 30 years. Partnership was in a revocable trust owned by husband and wife. Terms of trust were that all assets transferred to surviving spouse. The assets held in partnership were land, building and cash. No liabilities owed. In 2015 wife passed away. Husband continued operating business. Need to file short year 1065(which I know is late). Remainder of year will be reported on Husbands 1040 Sch. E(all rental activity). Husband should receive a setup in basis for wife's 50% share of assets. Since all assets automatically transferred to husband do I need to file an election for a step up in basis or does he automatically receive increase in basis due to the inheritance? I have to enter depreciation of assets on partner side calculated for the short year. When the assets are entered on the 1040 side do I enter them as being acquired on the date after the DOD at the net value(purchase price less prior depreciation taken on 1065) or do I enter the original purchase price and then enter the prior depreciation.

Get to a tax professional. There is no easy answer to your question. One problem is if you had/have a partnership at all. When the trust held all the partner interests in the partnership, it might have been considered to end the partnership as an entity. If we ignore the trust issue, a partnership has an inside and an outside basis. If the organizing documents had a 754 or the partnership properly makes a 754 election, then the inside basis for the partner is stepped as adjusted by any partnership income in respect to the decedent. If not, the outside basis would be the thing stepped. That you are now treating the partnership dissolved (For the same reason it would have been dissolved when all interests when to the same owner.), I don't think you need to make an election to get a stepped basis.