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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.


The BIDaWIZ Team's Answer:

If all you'd like to do is employ your husband and reduce his interest in the partnership, than you may want him to gift his share to you. The basis of assets remain as it and get transferred to you and no profit or loss is recognized. You would file a final partnership tax return for the year and the LLC becomes a disregarded entity.

The BIDaWIZ Team



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