1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
RSB [31]
3 years ago
14

Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by co

ntributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $59,000 nonrecourse loan from First Bank at the time it is formed. Brett contributes cash of $9,500 and a building he bought as a storefront for the motorcycles. The building has a FMV of $54,000, an adjusted basis of $39,000, and is secured by a $44,000 nonrecourse mortgage that the LLC will assume. What is Brett's outside tax basis in his LLC interest?
Business
1 answer:
KATRIN_1 [288]3 years ago
7 0

Answer:

$58,500

Explanation:

The outside basis is defined as the tax basis that a partner has on the partnership. To find it, the value of all the resources contributed by the partner is taken and the debt relief and any debt assigned is subtracted. To solve this exercise, we should follow these steps:

1. Determine the contributed capital.

According to the problem statement, Brett provided cash ($ 9,500) and a building (here the value of the adjusted base, $ 39,000, is taken). Therefore, the total contributions are $48,500.

2. Calculate capital increases.

The partnership obtained a loan for $59,000, which was shared equally among the partners. Therefore, Brett received 50%, that is, $29,500.

Now, we must add the contributed capital plus capital increases:

48,500+29,500=78,000

3. Calculate mortgage debt issues.

The nonresource mortgage is 44,000, a value that exceeds the basis of the contributed property. In that case, the surplus is taxed to the contributing partner. To determine it, simply subtract the nonresource mortgage less adjusted basis of the building:

44,000-39,000=5,000

On the other hand, the remaining mortgage on the building is calculated, by dividing the value of the adjusted base of the property, in this case, 39,000 by 2, which results in 19,500.

Therefore, mortgage debt issues are equivalent to:

5,000+19,500=24,500

We add the contributed capital plus capital increases plus mortgage debt issues:

78,000+24,500=102,500

4. Subtract debts.

The partnership assumes the nonrecourse mortgage (which is computed as a debt) for 44,000. Because this component is not covered entirely by Brett, then this amount must be deducted from his individual tax base.

Therefore:

102,500-44,000=58,500

58,500 is Brett´s outside tax basis in his LLC interest.

On a balance sheet, we can see it as follows:

Particulars                                Amount in $

Cash                                                9,500

+Adjusted basis of the                39,000

building

+50% profit sharing ratio            29,500

+Nonrecourse mortgage               5,000

less adjusted basis

+Remaining mortgage on            19,500

building

TOTAL                                             102,500

-Debt on building                          (44,000)

Outside tax basis                          58,500

You might be interested in
The presence of _____________________ in transactions involving goods can easily cause a ______________________ if the result is
DaniilM [7]

Answer:

The answer is letter A.

Explanation:

The presence of ___imperfect information__________________ in transactions involving goods can easily cause a _____thin market_________________ if the result is only a relatively small number of buyer and sellers communicating enough information so that they can agree on a price.

8 0
3 years ago
Need help asap!!!! pls
kap26 [50]

Answer:

I'm pretty sure it b, and if it's not I am so srry

6 0
3 years ago
A blackboard used during a presentation would NOT be considered a visual aid<br><br> true<br> false
Tresset [83]

falsehbbguwknbh iigggvow jiw

5 0
3 years ago
THANK YOU GUYS FOR ALL THE HELP
photoshop1234 [79]
I just answered this to get a point sorry ☺
3 0
3 years ago
1. Assume you are planning to invest $200 each year for four years and will earn 8 percent per year. Determine the future value
Virty [35]

Answer:

The future value of the $200 invested yearly for 4 years at 8% is $973.32

Explanation:

The future value of an immediate annuity is given by the formula = (1+r)*[P*((1+r)^n-1)/r]

P=is the periodic payment of $200

r=rate of return=8 percent

n=number of years=4

By slotting the variables into the formula we have:

Fv=(1+0.08)*(200*((1+0.08)^4-1)/0.08)

FV=$973.32

Judging by the concept of time value of money, it is expected that the sum invested at interest would have been much more at maturity of the investment as $1 today should give a lot more than $1 in future.

6 0
3 years ago
Read 2 more answers
Other questions:
  • Why might a town decide to issue bonds??
    11·2 answers
  • Identify the level of the literature hierarchy for u.s. gaap to which each item belongs
    10·1 answer
  • "​generally, _________ is a​ company's most expensive promotional tool."
    13·1 answer
  • Backed by the U.S. government, these financial instruments are short-term debt obligations with a maturity of less than one year
    10·2 answers
  • Suppose that the government implements expansionary fiscal policy that raises aggregate demand, but the policy is unanticipated.
    15·1 answer
  • What does negative savings rate mean?
    10·1 answer
  • B. The shape made by re-arranging the pizza the pizza slices look like a parallelogram.
    8·1 answer
  • Gap, Inc. owns Banana Republic, Old Navy, and Gap brands, all of which are brands of clothing targeting different segments of th
    14·1 answer
  • Difference between real flows and monetary flows​
    9·1 answer
  • AYUDA porfa quiero sacar 10 en esto porfavor mis notas estan bajando!
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!