Question

When High Horizon LLC was formed, Maude contributed the following assets in exchange for a 25 percent capital and profits interest in the LLC:

Maude:                                               Basis    Fair Market Value

            Cash                                             $ 25,000         $ 25,000

            Land*                                             100,000          350,000

               Totals                                       $ 125,000       $ 375,000

           

            *Nonrecourse debt secured by the land equals $160,000

           

James, Harold and Jenny each contributed $220,000 in cash for a 25% profits and capital interest. What is Maude’s tax basis in her LLC interest?

Answer 1

Ans:

Particulars	Maude	Others
Basis in land	$100,000
Cash	$25,000	$220,000
Non recourse debt secured by the land excess of basis(160,000-100,000)	$60,000
Balance Non recourse debt(160,000-60,000)*25%	$25,000	$25,000
Relief	-160,000
Initial Tax basis in the LLC	$50,000	$245,000

What is Maude’s tax basis in her LLC interest is $50,000