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There is a limited partnership (an LLC taxed as a partnership) that owns various assets.

If I buy interests in the partnership from existing limited partners at an arbitrary price, how is the cost basis of the assets computed.

For example, lets say it owned:

1 Oz of Gold worth $1887 at time of writing but acquired 5 years ago for $1300

2 shares of Tesla worth $663 at time of writing but acquired 5 years ago for $38 pre-split

1 Bitcoin worth $26,000 at time of writing but acquired less than one year ago (9 months) for $5500

This has a total value of $29,213.

and I bought 100% of the LP at a premium for $30,000, which has no revenue or debt or additional intellectual property. Assume I just like the name of the LP and that myself and all relevant parties agreed to a price 🤷‍♂️ so we can all just focus on the real question:

What is my cost basis of the LP's assets?

For example, do I inherit the cost basis of the gold's $1300 purchase price and long term capital rates?

Please include sources.

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  • LLCs are - fundamentally - pass-through entities. Any other conceptual idea, is in dreamland.
    – Fattie
    Dec 31 '20 at 2:27
  • @Fattie what point were you trying to make? The distinction is important because they can be treated and taxed as corporations. This distinction does not change that the shares/interests/equity in the entity can be separate from the entity's assets, which is what this question sought to clarify.
    – CQM
    Dec 31 '20 at 2:41
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According to a major accounting firm (edit: who I already work with and simply replied to my emails over a holiday season faster than I expected), the buyer of an LP share, or LLC membership interest, inherits the cost basis of the LP assets. Barring section 754 elections which matches the investment cost basis with the investor cost basis.

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  • "Please include sources."
    – RonJohn
    Dec 30 '20 at 22:39
  • @RonJohn the accountant from a major firm that I already work with who responded to my email over the holidays, faster than I expected. I wrote this question and I wrote this answer.
    – CQM
    Dec 31 '20 at 2:39

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