Question

Problem 10-37 (Algorithmic) (LO. 6, 7, 8, 9, 10, 11)

Amy and Mitchell share equally in the profits, losses, and capital of the accrual basis AM Products LLC. The LLC does not need to report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person.

At the beginning of the current tax year, Amy's capital account has a balance of $696,000, and the LLC has debts of $452,400 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 debt is shared equally between the partners. The following information about AM's operations for the current year is obtained from the LLC's records.

Operating income*	$1,044,000
W-2 wages	200,000
Depreciation expense	300,000
Interest income	10,440
Long-term capital loss	6,960
Long-term capital gain	20,880
Charitable contribution (cash)	10,490
Cash distribution to Amy	52,200
Unadjusted basis of partnership depreciable property immediately after acquisition	1,600,000

* Operating income equals revenue less operating expenses (other than expenses listed separately above).

Year-end LLC debt payable to unrelated parties is $316,680. Assume that all transactions are reflected in Amy's beginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income deduction.

d. Prepare Amy's tax basis capital account rollforward from the beginning to the end of the tax year. How does her ending capital account differ from her ending tax basis in the LLC interest as calculated in part (a)?

Capital account balance, beginning year $    Ordinary income $    Interest income    Net long-term capital gain $ Less:    Charitable contribution $    Cash distribution to Amy Capital account balance, end of year $

Amy's capital account differs from her basis only by the amount of her share of LLC (assets, liabilities, losses, gains, OR distribution) .

Answer 1