My husband and I currently file a 1065 for our business. We'd like to restructure to a single owner LLC and I would employ my husband. I've been told that the IRS won't allow me to step up my "basis" this way, however, from what I've read, transfers between spouses are allowed. Another CPA told me that these changes are typically handled at the state level, not the federal level, except to file a final 1065. The state I live in has no income tax. General partnerships do not report to the state at all. Creating a single owner LLC is allowed.