Tom is talking to his friend Bob, who has an interest in Freedom, LLC, about purchasing his LLC interest

Accounting Jan 16, 2021

Tom is talking to his friend Bob, who has an interest in Freedom, LLC, about purchasing his LLC interest. Bob's outside basis in Freedom, LLC is $5,000. This includes his $1,500 one-fourth share of the LLC's debt. Bob's 704(b) capital account is $12,000. If Tom bought Bob's LLC interest for $7,000, what would Tom's outside basis be in Freedom, LLC?

Multiple Choice

$5,000.
$5,500.
$7,000.
$8,500.

Expert Solution

SOLUTION: Option D is the correct answer of this question.

Tom bought Bob's LLC interest $ 7000

Add: Share of LLC's debt $ 1500

Tom's outside basis be in Freedom, LLC $ 8500

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