Tax Law (Questions About Taxes)/LLC


I have a brother and sister who recently inherited a farm from their mother 50/50. They formed an LLC. Neithwr one has contributed anything else to it. They have now decided to sell it. Are tgere any tax consequences of it being an LLC now rather than it just belonging to them personally? I assume the LLC will show the sale and then it will flow to their personal return but is there anything else that has to be done? The farm also has not been appraised. She paased away about 7-8 months ago. The county's taxable value is only about 500,000, but the farm is easily worth about a million. I told them it may be worth paying for an appraisal rather than taking a chance on the IRS qyestioning their cost and making them use the taxable value as their cost. I told them normally if you sell within that time frame you can count the sell price as the cost.what would you recomnend?

When their mother passed away, the "basis" of the property was set at FMV (Fair Market Value) the only true way to find the Fair market Value is to put it on the market and sell it, at arms length, to the highest bidder. The IRS can't argue an arms length sale into the open market.

If the Buyer were going to finance the farm, the lender will require that an appraisal be done as part of the process. Paying for an additional appraisal, while it does contribute to the economy, at least for one appraiser in the area, it isn't necessary before they put it on the market.

Start high, accept offers, that will tell you what a real person looking to buy that exact farm would be willing to pay. An appraisal is only an assessment according to other theoretically similar properties. Their farm could be worth significantly more or less than an appraisal, even how it is fenced may affect the price, or which direction the ground slopes, toward or away from the sun, or the quality of the soil, or the availability of water, or even the numerals of the address could be a factor for some buyers.

Richard Fritzler

Tax Law (Questions About Taxes)

All Answers

Answers by Expert:

Ask Experts


Richard Fritzler


Specializing in Business and Corporate taxation. Comparing the advantages and requirements of different business entities, such as Sub-S Corporations, LLC`s, Partnerships (Both Limited and General), Doing Business as a Sole Proprietor, or Using a C-Corporation. Issues regarding K-1 distributions, 1040, schedule C, 1120, 1120s. Are you considering domiciling a Corporation in a low tax state? I can review the benefits and misinformation that exists.


I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

National Small Business Owners Association.
Contributing author to "The Corporate Standard Newsletter".

Contributing author to "The Corporate Standard Newsletter".

I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

©2017 All rights reserved.