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What happens to negative capital of deceased partner?

  • 1.  What happens to negative capital of deceased partner?

    Bronze Most Valuable Member
    Posted 16 days ago

    Partner in a real estate partnership dies with a negative capital account.  Decedent partner's child inherits his interest. Partnership makes 754 election.

    What happens to negative capital account? I am thinking that child assumes negative capital account which then gets netted with stepped up basis due to 754 adjustment? Or does child's capital account start fresh from zero and estate of decedent partner has to pick up income? Literature I've researched does spell this out.

    Thanks to you all out there as always.

     

    Paul Herman CPA
    707 Westchester Avenue,  Suite 302
    White Plains, NY 10604
    Phone  (914) 400-0300


     

     



  • 2.  RE: What happens to negative capital of deceased partner?

    Posted 13 days ago
    My understanding is negative capital account gets stepped up to FMV of partnership interest then that capital account gets transferred to
    child

    Say negative capital is 1,000 before death and FMV of Partnership Interest is 1,000

    Debit  754 Asset   2,000
      Credit  Deceased Partner's Capital Account 2000


    Debit Deceased Partner's Capital Account 1,000
         Credit Childs Capital Account                         1,000


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    Perry Paletta CPA
    info@paletta.net
    http://www.paletta.net
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