Question

Seeley and Swan share equally in the profits, losses, and capital of the accrual basis SS LLC. SS Products LLC. Seeley is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current tax year, Seeley's capital account has a balance of $815,000 and the LLC has debts of $192,000 payable to unrelated parties. The debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. Assume that all LLC recourse debt is shared equally between the partners. The following information about SS's operations for the current year is obtained from the LLC's records:
Ordinary income $1,400,000, Interest income 42,000, Short-term capital loss 16,000, Long-term capital gain 59,000, Charitable contribution 12,000, Cash distribution to Seeley 62,000 Year-end LLC debt payable to unrelated parties is $120,000. If all transactions are reflected in her beginning capital and basis in the same manner, what is Seeley's basis in her LLC interest:
A. Seeley's basis in the LLC interest at the beginning of the year is $ 911,000 . A partner's basis in the LLC interest is important for determining the treatment of distributions from the LLC to the partner, establishing the deductibility of LLC losses, and calculating gain or loss on the partner's disposition of the LLC interest. After the partner is admitted to the LLC, the partner's basis is adjusted for numerous items.
B. Seeley's basis in the LLC interest at the end of the year is $____________

Answer 1

Answer:

Seeley's basis in the LLC interest at the end of the year is $1,549,500

Explanation:

In order to calculate Seeley's basis in the LLC interest at the end of the year we would have to make the following calculations:

Particulars                                              Amount               Amount

Seeley's beginning capital balance                                $815,000

Add Seeley's share of :  

Taxable Income($1,400,000*1/2)               $700,000  

Interest Income($42,000/2)                    $21,000  

Net Long term Gain(($59,000-$16,000)/2) $21,500                $742,500

Total                                                                                $1557500

Less:  

Charitable Contribution($12,000/2)        $ 6,000  

Cash Distribution to Seeley                        $62,000                   $68,000

Balance                                                                                  $1,489,500

Add: Share of Seeley's Debt($120,000/2)                            $60,000

Seeley's basis at the end of the year                                  $1,549,500