Question

Frank and Bob are equal members in Soxy Socks, LLC. When forming the LLC, Frank contributed $50,000 in cash and $50,000 worth of equipment. Frank's adjusted basis in the equipment was $35,000. Bob contributed $50,000 in cash and $50,000 worth of land. Bob's adjusted basis in the land was $30,000. On 3/15/X4, Soxy Socks sells the land Bob contributed for $60,000. How much gain (loss) related to this transaction will Bob report on his X4 return?A) $10,000. B) $15,000. C) $25,000.D) $35,000.

Answer 1

Answer:

c. $25,000

Explanation:

The computation of gain (loss) is shown below:-

Land value                                $50,000

Less: Bob adjusted basis         $30,000

Built in gain allocated to Bob $20,000

Sales consideration                   $60,000

Less: Land value                         $50,000

Gain to be allocated between

two members                              $10,000

Total gain allocated to Bob

($20,000 + $10,000 × 50%)       $25,000