Problem 10-46 (LO. 7, 9, 10) Amy and Mitchell share equally In the profits, loss
ID: 2329828 • Letter: P
Question
Problem 10-46 (LO. 7, 9, 10) Amy and Mitchell share equally In the profits, losses, and capital of the accrual basls AM Products LLC. Amy 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, 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 has 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 abtained from the LLC's records. Ordinary income W-2 wages to employees Depreciation expense Interest income Short-term capital loss Long-term capital gain Charitable contribution (cash) Cash distribution to Amy Unadjusted basis of partnership depreciable property $900,000 200,000 300,000 4.000 6,000 12,000 4,000 20,000 1,600,000 Year-end LLC debt payable to unrelated parties is40,000. Assume all transacdons are reflected in her beginnino capital and basis In the same manner, calculate Amy's basis in her LLC interest: a. Amy's basis in the LLC interest at the beginning of the year is 400,000V Y Check My Wark 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. Amy's basis in the LLC interest at the end of the year is 943,000XExplanation / Answer
Part B
At the end of the year
Capital account balance, beginning of the year....... $ 300,000 Add:
Amy's share of:Taxable income (900,000x50%).....$ 450,000 Tax-exempt interest income.................................. ......2,000
Section 1231 gain............................................... ...... .. 6,000
Total ....................................... .................. ... .... ..... 758,000
Less:
Long-term capital loss ...............................6,000
Charitable contribution............................... 4,000
Cash distribution to Amy....................... .. 20,000
......................................................................... ........... 728,000
Addition: Share of AM's debt (140,000x/2)................ 70,000
Amy's basis at the end of the year.......................... $ 798,000
Amy's basis in the LLC interest at the end of year 798000Related Questions
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