Weather related sale of livestock -Involuntary Conversion.

Feb 09, 2007 3 Replies
T

Under Section 451(e) of the IRC gains on sale of livestock due to drought can be postponed under involuntary conversion rules. My question is whether this election would have to be made at the LLC level or could each LLC member make the election separately based on his share of the gain as reported on his K-1.? I am preparing the LLC tax return and the personal returns of one LLC member. In his case, due to other expenses, losses, etc., he would be better off NOT electing to postpone the gain. In the event the other 50% owner wants to postpone his share, I would like to know if each LLC member is able to decide to make different choices. I would appreciate any comments, answers or suggestions.



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S

The election must be made by the partnership. See Code Sec.

703(b), which provides that all elections affecting the computation of taxable income derived from a partnership are made by the partnership except the following elections: 1) under Sec. 108(b)(5) or 108(c)(3); 2) under Sec. 617; or 3) under Sec. 901.

The elections listed in 1) - 3) are made by each partner separately. Since an election under Sec. 451(e) is not on that list, it must be made by the partnership.

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H

I have not looked it up for you, given this time of the year, but my gut feeling is that this is like section 179 election, to be made at entity level. What say others?

ChEAr$, Harlan Lunsford, EA n LA

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T

Thanks. Your answer was clear and explicit and completely answers my question.

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