7765 / What is the basis of the estate or other successor in interest in a limited partnership?

The estate or other successor in interest has a basis in the partnership interest “stepped up” (or down) to the fair market value of the interest on the date of death, or alternative valuation date used for estate tax purposes, increased by the estate’s (or successor’s) share of partnership liabilities on that date, and reduced to the extent the value is attributable to items of income in respect of a decedent.¹ A modified carryover basis may replace stepped up basis for property acquired from a decedent dying in 2010. See Q 692, Q 747. For partnership tax years beginning after 1997, the partnership tax year ends with respect to a partner who dies (see Q 7763). For partnership tax years beginning before 1998, the distributive share attributable to the period ending with the date of death which was taxable to the estate or successor was income in respect of a decedent, not part of the basis.²

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1. Treas. Reg. § 1.742-1.

2. Treas. Reg. §§ 1.753-1(b), 1.706-1(c)(2).

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