Asset Basis for LLC Partnership

[JoshinNC]

Assume the following:

LLC1 (MMLLC) receives listed property for $0 and has FMV of $100k. LLC1 distributes the listed property to Partner1 and Partner2.

Partner1 and Partner2 contribute listed property to LLC2.

Question - Is LLC2's depreciable basis in the listed property $0?

I assume YES because the partners' basis in the listed property was $0 because LLC1's basis was $0. Any "special" rules regarding assets distributed to partners and contributed by partners I need to keep in mind?

[DaveinTexas]

Liquidating Distribution

Just be sure to follow the liquidating distribution rules to figure gain/loss on the liquidation of LLC1; if any cash or other assets were received in the distribution.

The partners should realize no gain (as long as there are no other assets received in the liquidation of LLC1) and the listed property should retain its carryover basis ($0) to the partners, and then to LLC2. Also, the new LLC2 should not have to realize gain (Sec 751 transfer). This is because if this asset is eventually sold, it will produce a Sec 1231 gain (ordinary income to the partners).

I assumed LLC1 was liquidated and there were only 2 partners in the partnership.