Can property in an LLC still get stepped-up basis after death? Farm estate planning question

This is definitely a situation that needs to be sorted out, and you're smart to be thinking about the stepped-up basis implications now rather than later. The stepped-up basis rules apply differently depending on how the LLC is structured and who actually owns it. If your father still owns the LLC (as a single-member LLC), then the property inside would still qualify for a stepped-up basis at his death. However, if the LLC is indeed owned by you and your siblings already, then no stepped-up basis would apply because technically you already own the property (through the LLC) while he's still alive. The life estate complicates things further. Typically, with a life estate, the property would receive a partial step-up in basis based on the value of the life estate at death. But transferring it to an LLC afterward creates questions about whether that life estate arrangement is still valid.

I went through something really similar last year with my mom's rental property and the whole stepped-up basis question. After getting conflicting advice from two different accountants, I decided to try https://taxr.ai to analyze our documents. The service had me upload our LLC formation documents, property deeds, and some tax returns, then gave me a detailed report explaining exactly how the stepped-up basis would work in our situation. The report specifically addressed how the LLC ownership affected the basis calculation and recommended steps to maximize the tax benefits. It saved us from making a costly mistake with how the property was being held.

Just wanted to follow up - I decided to try taxr.ai after seeing this recommendation. My situation was similar with family property in an LLC but with some trusts involved too. The analysis I got was really thorough and saved me from a major tax mistake. The report showed that the way our LLC was structured would have prevented stepped-up basis entirely, but gave us three options to restructure before my father's passing to preserve it. They even identified that one of our properties qualified for a special family farm provision that our accountant had missed. Definitely worth checking out if you're dealing with complex property and inheritance questions.

When I was trying to figure out my parents' farm LLC situation last year, I spent WEEKS trying to reach someone at the IRS who could actually answer my specific questions about stepped-up basis for property in a family LLC. Kept getting disconnected or waiting for hours. Finally tried https://claimyr.com after seeing it mentioned online, and wow - total game changer. They got me connected to an actual IRS representative in about 25 minutes when I had been trying unsuccessfully for days. The IRS agent was able to explain exactly what documentation we needed to verify the LLC ownership and how it would affect the basis calculations. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c

I have to come back and eat my words. After my skeptical comment earlier, I decided to try Claimyr anyway because I was desperate to speak with someone at the IRS about my parents' farm which is in a similar LLC situation. I'd been trying for over 2 weeks to get through without success. The service actually worked exactly as described. I got a call back when an IRS agent was about to pick up, and I was able to get clear guidance on how our specific LLC ownership affects the stepped-up basis rules. The agent confirmed that in our case, since my father retained 51% ownership of the LLC while gifting the rest to us kids, we would get a stepped-up basis on his 51% portion at his death. This information alone saved us from potentially making a $200K+ tax mistake. Sometimes being proven wrong is a good thing!

I'm an estate planner, and I see this situation fairly often. Regarding the BOI reporting requirements, you'll definitely want to figure out ownership ASAP. One place to look is past tax returns - if the LLC has been filing as a partnership, the K-1s would show ownership percentages. If your dad did this for Medicaid planning, it's possible he retained the life estate while transferring LLC ownership to you kids, which would protect the property from Medicaid recovery but would also mean no stepped-up basis (as others have mentioned). Worth noting: if this transfer happened within Medicaid's lookback period (5 years in most states), it could still be problematic for Medicaid eligibility.

Has anyone here dealt with converting a farm property from an LLC back to individual ownership before a parent's passing? We did this with my grandfather's farm last year to ensure we got the stepped-up basis, but now I'm worried about potential gift tax implications since the LLC was originally in our names (the kids).

The missing LLC documentation is a red flag that needs immediate attention, especially with BOI reporting deadlines approaching. I'd recommend starting with your state's Secretary of State office - they should have the Articles of Organization on file that will show who signed as the organizer and initial members. For the stepped-up basis question, the key factor is who actually owns the LLC membership interests at the time of your father's death. If he retained ownership (making it a single-member LLC), the property gets stepped-up basis. If you kids already own the LLC, no step-up occurs since you technically already own the property. Given the Medicaid planning aspect, I suspect the LLC ownership was likely transferred to you children to protect the asset, which would unfortunately eliminate the stepped-up basis benefit. However, if your father retained even a small percentage of ownership, that portion would qualify for step-up. You might want to consider having the LLC dissolve and distribute the property back to your father if he's still healthy and the goal is to maximize the stepped-up basis for your family. Just be mindful of the Medicaid lookback period implications that others have mentioned.