Question

5. Amy and Mitchell share equally in the profits, losses and capital of the accrual basis AM Products LLC. Amy is a managing member of the LLC (treated as a partner) and is a U.S. person. At the beginning of the current year, Amy’s capital account has a balance of $300,000, and the LLC has debts of $200,000 payable to unrelated parties. The debts are recourse to the LLC but neither of the LLC members had personally guaranteed them. Assume that all LLC debt is shared equally between the partners. The following information about AM’s operations for the current year is obtained from the LLC’s records. Ordinary income $ 900,000 W-2 wages to employees 200,000 Depreciation expenses 300,000 Interest income 4,000 Short-term capital loss 6,000 Long term capital gain 12,000 Charitable contributions (cash) 4,000 Cash distribution to Amy 20,000 Unadjusted basis of partnership depreciable property 1,600,000 Year end LLC debt payable to unrelated parties is $140,000. Assume all transactions are reflected in her beginning capital and basis in the same manner. Calculate Amy’s basis in her LLC interest a. At the beginning of the year (remember to consider whether the debt will be treated as recourse or non-recourse) b. At the end of the year

Answer 1

Answer ofAmys Basis in her LLc Interest Calwlahon Crinen Opening Cupital Ali Balance of Amy uds Aebt (Payable hrelaed forie) 3,0Db 21a00 Eual chae in LL's Debt Calul an ofTanatle nlome duhng the year Amt pOrtiolas Ordimany Inlome wages to mplnyees (w- Bepreahion Epeny Tamable Jnlome 21a00) (Sranoa) Part a Bagining Amy's Capital atthe portal as Amt $31a0,00 Opening Baance tshare Amy in Aebt Balance af uc42 2a0a5

Amy's Account Balance at clasing yea Amt$ Partiwlos 3000 Eegining apital Bolorce lat) tshane in Tonable Intome 410/04-501) Share in ntere thlme 410005 $90100D 2000 mgtm opial ofter gain $3000 adjusting Shot tem Locs apitol 9121000-4 6000 50 5105,000 Cash ishibunbn to Amy Chantable Cmtri botun (20100D) (4 2000) (- C3u0005 closing Bebt 10100D ( my's share in Bal once 050 5,53,000