Question

Styling Shoes, LLC filed its 20X8 Form 1065 on March 15, 20X9. Styling had three members with the following ownership interests and tax basis at the beginning of the 20X8: (1) Jane, a member with a 25% profits and capital interest and a $11,000 outside basis, (2) Joe, a member with a 45% profits and capital interest and a $16,000 outside basis, and (3) Jack, a member with a 30% profits and capital interest and a $8,000 outside basis. The following items were reported on Styling's Schedule K for the year: ordinary income of $112,000, Section 1231 gain of $21,000, charitable contributions of $31,000, and tax-exempt income of $9,000. In addition, Styling received an additional bank loan of $18,000 during 20X8. What is Jane's tax basis after adjustment for her share of these items?

Multiple Choice

• $38,750.

• $43,250.

• $46,700.

• $74,050.

Answer 1

Solution

Jane's tax basis after adjustment for her share of these items is (b) $43,250

Explanation

Ordinary Income $112,000

Section 1231 Gain $ 21,000

Tax-Exempt Income $9,000

Additional Bank loan received $18,000

Charitable contribution ($31,000)

Total $129,000

Profit (25%) $32,250

Capital Interest $11,000

Tax basis after adjustment $43,250