When High Horizon LLC was formed, Maude contributed the following assets in exch

Question

When High Horizon LLC was formed, Maude contributed the following assets in exchange for a 25 percent capital and profits interest in the LLC:

*Nonrecourse debt secured by the land equals $177,500

James, Harold, and Jenny each contributed $221,250 in cash for a 25 percent profits and capital interest. (Leave no answer blank. Enter zero if applicable.)

Problem 20-42 Part-b

b. What is Maude’s tax basis in her LLC interest?

Basis Fair Market Value Maude: Cash $ 25,750 $ 25,750 Land* 115,500 373,000 Totals $ 141,250 $ 398,750

Explanation / Answer

SOLUTION

Maude’s tax basis in her LLC interest = $54,625

S.No. Description Maude ($) Explanation 1. Basis in contributed Land 115,500 2. Cash contributed 25,750 3. Nonrecourse mortgage inexcess of basis in contributed land 62,000 Nonrecourse debt > basis is allocated only to Maude 4. Remaining nonrecourse mortgage 28,875 25% *[177,500 - (3)] 5. Relief from mortgage debt (177,500) 6. Tax basis in LLC 54,625 (1) + (2) + (3)+ (4) + (5)

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