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

Accounting

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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.