Posted by Dave Murray, Ohio CPA on August 26, 2003 at 13:46:55:
An LLC is a “pass-through” entity and thus the individual members are still subject to the capital gains tax. If father and mother owned the property jointly then you get a step-up basis to one half of FMV for mother’s share at her death. So first the capital gains may not be as high as you think. Secondly, the rate on long term capital gains is now 15%, that is hardly “high”. If I was given property, I’d gladly pay 15% in LTCG tax when I sold it. If your sister thinks 100% of nothing is better than 85% of something, have her call me, I’ve got some deals for her!! P.S. your Dad likely has gift tax issues by doing this transfer. Probably no tax is owed, but he should at least file a return, even if late, to start the statute of limitations running. Otherwise IRS could contest the value of the gift any time they want to.