Seeley and Swan share equally in the profits, losses, and capital of the accrual
ID: 2509986 • Letter: S
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 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 $____________
Please Answer b.
Explanation / Answer
Answer
Seeley's basis in the LLC interest at the end of the year:
Particulars Amount Amount Capital account balance, beginning of year $815000 Add Seeley's share of: -Taxable income ( $1,400,000 /2) $700000 -Interest income(42,000/2) $21000 -Net short-term capital gain (59,000 /2) $29500 $750500 Total Less:Charitable contribution (12000/2) $6000 Cash distribution to Seeley $62000 ($68000) Add: Share of AM's debt (($160,000 × 1/2)) $80000 Seeley's basis, end of year $1577500