Achieving Step-up in Asset Basis in Acquisitions of LLC Membership Interests

In acquisitions of any company, issues related to basis are often an important aspect of the transaction. For example, an acquirer of a company often is looking to achieve a full-step in the basis of the company's assets to reflect its purchase price even in cases where the transaction is structured as an acquisition of the equity interests (or portion thereof) of the company. This holds true in connection with the acquisition of membership interests of a limited liability company. Fortunately, several tools are available that may enable an acquirer of membership interest to achieve a step-up in the basis of the company's assets.

Both buyers and sellers of membership interests should be aware of the rules governing the tax treatment afforded to sales of membership interests so that such transactions are structured in the most tax-efficient manner possible.

This course, presented by J. Troy Terakedis, co-chair of Dickinson Wright's Tax Practice Group, will discuss these tax rules - specifically, as they relate to and holding periods for a membership interest in certain transactions.

Learning Objectives:

  1. Review the federal income tax consequences when a single-member limited liability company that is disregarded as an entity separate from its owner becomes an entity with more than one owner that is classified as a partnership as set forth in Rev. Rul. 99-5
  2. Assess the federal income tax consequences if one person purchases all of the membership interests in a limited liability company that is classified as a partnership resulting in the limited liability company ceasing to be classified as such as set forth in Rev. Rul. 99-6
  3. Identify certain holding period implications in connection with the transactions described in Rev. Rul. 99-5 and Rev. Rul. 99-6
  4. Discuss the Section 754 election and special basis adjustments under Section 743

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