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Erica and Brett decide to form their new motorcycle business as an LLC
Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $44,000 nonrecourse loan from First Bank at the time it is formed. Brett contributes cash of $3,800 and a building he bought as a storefront for the motorcycles. The building has a FMV of $39,000, an adjusted basis of $24,000, and is secured by a $29,000 nonrecourse mortgage that the LLC will assume. What is Brett's outside tax basis in his LLC interest?
Multiple Choice
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$31,500.
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$32,800.
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$36,500.
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$37,800.
Expert Solution
Calculation of outside tax basis of Brett in his LLC interest-
= 3,800+24,000+(44,000*50%)+(29,000-24,000)+(24,000*50%)-29,000
=27,800+22,000+5,000+12,000-29000
=37,800
Outside basis of Brett in his LLC interest = 37,800
Optiion "D" is correct answer.
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