Question

Lola owns a one-half interest in the Lenax LLC. Her basis in this ownership interest is $22,000 at the end of the year, after accounting for the calendar year LLC's current operations. On that date, the LLC distributes $25,000 cash to Lola in a proportionate current distribution. What is the amount of any gain or los

Answer 1

Answer: $3,000

Explanation:

With a basis of $22,000, Lola received a cash distribution of $25,000.

She would therefore get a gain (loss) of,

= $25,000 - $22,000

= $3,000

Lola received a gain of $3,000.

It is worthy of note that her basis after this distribution is now zero.

Answer 2

Answer:

Lola recognizes a $3,000 gain from this distribution

Explanation:

LLC distributed Cash $25,000

Less Basis in ownership interest $22,000

Gain $3,000

Therefore the amount of gain Lola recognized in the distribution is $3,000 because her basis in this ownership interest is $22,000 at the end of the year, in which the LLC distributes $25,000 cash to her in a proportionate current distribution leading to her recognized a GAIN.