Lance contributed investment property worth $500,000, purchased three years ago for $200,000 cash, to Cloud Peak...

Lance contributed investment property worth $500,000, purchased three years ago for $200,000 cash, to Cloud Peak LLC in exchange for an 85 percent profits and capital interest in the LLC. Cloud Peak owes $300,000 to its suppliers but has no other debts.

a. What is Lance’s tax basis in his LLC interest?

b. What is Lance’s holding period in his interest?

c. What is Cloud Peak’s basis in the contributed property?

d. What is Cloud Peak’s holding period in the contributed property?

Solutions

Expert Solution

Answer : -

a) $455,000

Lance’s basis in his LLC interest is made up of the $200,000 basis of the investment property he transferred to the LLC and his $255,000 share of the LLC debt (85% × 300,000). Because LLC general debt obligations are treated as non-recourse debt, Lance’s profit sharing ratio is used to allocate a portion of the LLC debt to him.

b) Three Years.

Because Lance contributed a capital asset, the holding period of the contributed asset "tacks onto" his partnership interest. The holding period is considered from the date of purchase which is three years.

c) $200,000.

The LLC takes a carryover basis in the contributed property. The basis of the Lance in property was $200,000 so the basis for the Cloud Peak's basis will be the same.

d) Three years.

The LLC inherets Lance’s holding period in the contributed property. The holding period of Lance is three years and the LLC i.e Cloud Peak's holding period will be the same i.e three years.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Lance contributed investment property worth $705,000, purchased Four years ago for $430,000 cash, to Cloud Peak...

Lance contributed investment property worth $705,000, purchased Four years ago for $430,000 cash, to Cloud Peak LLC in exchange for an 85 percent profits and capital interest in the LLC. Cloud Peak owes $525,000 to its suppliers but has no other debts. a. What is Lance’s tax basis in his LLC interest? b. What is Lance’s holding period in his interest? c. What is Cloud Peak’s basis in the contributed property? d. What is Cloud Peak’s holding period in the...

Lance contributed investment property worth $512,500, purchased Five years ago for $210,000 cash, to Cloud Peak...

Lance contributed investment property worth $512,500, purchased Five years ago for $210,000 cash, to Cloud Peak LLC in exchange for an 65 percent profits and capital interest in the LLC. Cloud Peak owes $520,000 to its suppliers but has no other debts. a. What is Lance’s tax basis in his LLC interest? b. What is Lance’s holding period in his interest? c. What is Cloud Peak’s basis in the contributed property? d. What is Cloud Peak’s holding period in the...

Laurel contributed equipment worth $200,000, purchased 10 months ago for $260,000 cash and used in her...

Laurel contributed equipment worth $200,000, purchased 10 months ago for $260,000 cash and used in her sole proprietorship, to Sand Creek LLC in exchange for a 15 percent profits and capital interest in the LLC. Laurel agreed to guarantee all $15,000 of Sand Creek’s accounts payable, but she did not guarantee any portion of the $100,000 nonrecourse mortgage securing Sand Creek’s office building. Other than the accounts payable and mortgage, Sand Creek does not owe any debts to other creditors....

Laurel contributed equipment worth $215,000, purchased 8 months ago for $240,000 cash and used in her...

Laurel contributed equipment worth $215,000, purchased 8 months ago for $240,000 cash and used in her sole proprietorship, to Sand Creek LLC in exchange for a 20 percent profits and capital interest in the LLC. Laurel agreed to guarantee all $14,400 of Sand Creek’s accounts payable, but she did not guarantee any portion of the $107,500 nonrecourse mortgage securing Sand Creek’s office building. Other than the accounts payable and mortgage, Sand Creek does not owe any debts to other creditors....

Laurel contributed equipment worth $215,000, purchased 8 months ago for $240,000 cash and used in her...

You founded your own firm three years ago. You initially contributed $200,000 of your ownmoney and...

You founded your own firm three years ago. You initially contributed $200,000 of your ownmoney and in return you received 2 million shares of stock . You also sold an additional 1 million shares of stock to angel investors. Now, you are considering a second round raising capital from a venture capital firm. This venture capital firm would invest $5 million and would receive 2 million newly issued shares in return. a.What is the price per share of this funding...

An investment was worth $38 two years ago, $52 one year ago, and is worth $46...

An investment was worth $38 two years ago, $52 one year ago, and is worth $46 today. The holding period return for the most recent year only (from 1 year ago to today) is _______%. If your answer is negative, be sure to include a negative sign preceding your answer (ex. -.045678 or -4.5678% should be entered as: -4.57). A(n) 3.3% bond with 6 years left to maturity has a YTM of 5.5%. The bond's price should be $__________. You should...

You founded your own firm three years ago. You initially contributed $200,000 of your own money...

You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 3 million shares of stock. Since then, you have sold an additional 2 million shares of stock to angel investors. You are now considering raising capital from a venture capital firm. This venture capital firm would invest $5 million and would receive 4 million newly issued shares in return. Suppose you sold the 2 million shares to the angel...

You purchased a property three years ago for $150,000. At the time, you put ten percent...

You purchased a property three years ago for $150,000. At the time, you put ten percent down and received a mortgage for ninety percent of the purchase price. Over the last three years, the value of the property has increased at an annual rate of three percent.a) Approximately how much is the property worth today? b) Ignore the increase in home equity over the last three years due to the amortization of the mortgage. What has been the overall increase...

An investor bought a property 3 years ago for Sh, 500,000 of which 20% was cost...

An investor bought a property 3 years ago for Sh, 500,000 of which 20% was cost of land. The building is depreciated on a straight-line basis over 20 years. The property can be sold today for Sh. 800,000. The loan outstanding today is Sh. 280,000. The capital gain tax on price appreciation is 20% and 25% on depreciation recapture.Calculate the after tax cash flow from the sale of the property.

Subjects