Question

Kevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan contributed the following assets: Basis Fair Market Value Kevan: Cash $ 15,000 $ 15,000 Land* 120,000 440,000 Totals $ 135,000 $ 455,000 *Nonrecourse debt secured by the land equals $210,000 Each member received a 33.33 percent capital and profits interest in the LLC. (Leave no answer blank. Enter zero if applicable. Do not round intermediate calculations.) b. What is Kevan’s tax basis in his LLC interest?

Answer 1

Answer:

$55,000

Explanation:

Kevan tax basis is calculated as:

$120,000 + $15,000 + $90,000 + $40,000 - $210,00

Kevin tax basis = $55,000

Using the following illustration

Kevan contributed $120,000 to land

Jerry and Dave both contributed $0

Kevan contributed 15,000 in cash

Jerry and Dave both contributed $245,000 in cash

Kevan Nonrecourse mortgage in excess of the contributed amount to land is $90,000.

Jerry and Dave: $0

This is so because all nonrecourse debt greater than the amount is allocated to Kevan only.

Kevan, Jerry and Dave Remaining Nonrecourse mortgage is $40,000

This is calculated by 33.3% of ($210,000 - $90,000)

Kevan Relief from mortgage debt is $210,000

Jerry and Dave Relief from mortgage debt is $0