Capital gains tax on LLC-owned inherited properties?

[Ron Brady]

My wife and I understand that we could give our home to an adult child when we pass away and that our adult child would pay no capital gains taxes on it.

But, we have multiple rental properties owned by our LLC and we want to give each our 7 children a property when we pass away. Since the properties are in our LLC, would the same capital gains tax rules apply or no? We're about to work with our estate planning attorney on this, but can someone with knowledge of the tax side of this issue weigh in please?

[Lance Lvovsky]

Assuming there is no C or S corp election in effect for the LLC, then real estate held in the LLC can receive a step up in basis just as real estate held outright can. A multi - member LLC Taxed as a partnership can have a 754 election done (complex tax election beyond the scope of this reply).

If you are doing basic vanilla estate planning, assign the LLC membership interests to a revocable living trust. You get the probate protection, privacy, control, plus the tax benefits of step up I mention above.