Mr. A formed LLC, he has Account Receivable worth $50,000 for tax preparation fees, and an...

Mr. A formed LLC, he has Account Receivable worth $50,000 for tax preparation fees, and an interest in a real estate partnership used as collateral for a loan from Bank, The fair market value of the real estate partnership interest is $500,000 and the loan is for $200,000.

1. What is the basis of the LLC? Is it $250,000?

2. If his son works in this LLC and gets 50% of the shareholder interest, Is it the basis for his son is 50% of FMV shares.

3. Is it Mr. A's LLC basis doesn't change and can deduct expenses from LLC's Ordinary gain?

Solutions

Expert Solution

LLC stands for the limited liability partnership.

The basis of LLC is the amount that is put in the business to start or acquire the business. This is the sum of those amounts that are put by the person to start the business or to acquire the business.

So in this case the basis of the LLC will the amount of loan and the account receivables.

Hence yes the basis of LLC is 250K as this is the amount that is currently in the LLC.

Yes, if his sons joins then the basis will the FMV of the share of the business. This is because of the fact that the LLC is considered as an separate legal entity and has a value that is same as FMV
Yes, the expenses of LLC can be deducted from the ordinary gain provided the expenses are fair and reasonable and are incurred with the purpose of earning gain.

The salaries that are paid to the non-members of the LLC are deductible provided the salaries that are paid are fair and are reasonable.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

1) Taxpayers are not allowed to deduct tax preparation fees as an itemized deduction. Group of...

1) Taxpayers are not allowed to deduct tax preparation fees as an itemized deduction. Group of answer choices True False 2) Which of the following is a true statement? Group of answer choices a. The deduction for investment interest expense is not subject to limitation. b. Taxpayers may only deduct interest on up to $1,500,000 of home acquisition indebtedness. c. Taxpayers may deduct interest on up to $1,000,000 of home-equity debt. d. A taxpayer who incurs acquisition indebtedness in 2018...

Mr X has 50,000 dollar in a bond fund and expects that every year he will...

Mr X has 50,000 dollar in a bond fund and expects that every year he will be able to save and add 12,000 dollars to the bond fund. Assuming that the bond fund will give 7% return per year, how much money will he have by the time of retirement (12 years).

The partnership of Butler, Osman, and Ward was formed several years as a local tax preparation...

The partnership of Butler, Osman, and Ward was formed several years as a local tax preparation firm. Two partners have reached retirement age and the partners have decided to terminate operations and liquidate the business. Liquidation expenses of $38,000 are expected. The partnership balance sheet at the start of liquidation is as follows: Cash $ 34,000 Liabilities $ 174,000 Accounts receivable 64,000 Butler, loan 34,000 Office equipment (net) 54,000 Butler, capital (25%) 70,000 Building (net) 130,000 Osman, capital (25%) 34,000...

The partnership of Butler, Osman, and Ward was formed several years as a local tax preparation...

The partnership of Butler, Osman, and Ward was formed several years as a local tax preparation firm. Two partners have reached retirement age and the partners have decided to terminate operations and liquidate the business. Liquidation expenses of $38,000 are expected. The partnership balance sheet at the start of liquidation is as follows: Cash: $34,000 Liabilities: $174,000 Accounts receivable: 64,000 Butler, loan: 34,000 Office equipment (net): 54,000 Butler, capital (25%): 70,000 Building (net): 130,000 Osman, capital: (25%) 34,000 Land: 120,000...

The partnership of Butler, Osman, and Ward was formed several years as a local tax preparation...

The partnership of Butler, Osman, and Ward was formed several years as a local tax preparation firm. Two partners have reached retirement age and the partners have decided to terminate operations and liquidate the business. Liquidation expenses of $50,000 are expected. The partnership balance sheet at the start of liquidation is as follows: Cash $ 46,000 Liabilities $ 186,000 Accounts receivable 76,000 Butler, loan 46,000 Office equipment (net) 66,000 Butler, capital (25%) 130,000 Building (net) 190,000 Osman, capital (25%) 46,000...

Mr. Hussein is the Marketing Manager of Synergy Trading LLC. He is responsible to coordinate and...

Mr. Hussein is the Marketing Manager of Synergy Trading LLC. He is responsible to coordinate and communicate with Sales, Advertising, Production, Packaging and Logistics teams to meet customers’ orders as well to maximize sales. Also, he needs to plan, communicate and monitor the work of the above-mentioned teams for achieving the company’ marketing goals and objectives. Mr. Hussein always communicates with Production and Sales teams. But he did not communicate the company’s new products or services to the Advertisement team....

t beginning of this year, XYZ Company has a machine worth 1000k, cash 30k, account receivable...

t beginning of this year, XYZ Company has a machine worth 1000k, cash 30k, account receivable 200k, inventory 100k, account payable 50k, and notes payable 80k. During this year, XYZ had sold 75k of inventory, which brought in 120k in revenue (with half cash and half credit). In addition, the company also paid down 37.5% of the notes payable. What is the change of NWC this year?

(Tax ex) The Bolos, LLC limited partnership was formed on Sep 30, 2008, by Zed, its...

(Tax ex) The Bolos, LLC limited partnership was formed on Sep 30, 2008, by Zed, its general partner, and a limited partner, Amy. Each contributed an equal amount of cash to start the new enterprise. In addition, Amy loaned the LLC $100,000. She has not been paid back yet. The partnership has an increase in recourse debt of $20,000. Also, Bolos, LLC is a holiday equipment retailer. Their specialties are grave markers, potted flowers, toys, and tequila. Zed has 40%...

Mr. Smith is contemplating retirement. He has just celebrated his 50 birthday and his net worth...

Mr. Smith is contemplating retirement. He has just celebrated his 50 birthday and his net worth is $2.5 million. He hopes that after retirement he can maintain a lifestyle that costs him $110000 per year in today's dollars (i.e., real dollars, inflation adjusted). For simplicity, assume that all expenses occur at the end of each year; the first expense of $110000 will happen one year from now. If he retires, he will invest all his net worth in government bonds...

Mr. X will retire in 10 years and currently has $200,000 inretirement account. He assumes...

Mr. X will retire in 10 years and currently has $200,000 in retirement account. He assumes that he will live up to 20 years after retirement. During those 20 years, he projects annual expenses of $50,000. If the interest rate is 7%, how much he needs to deposit annually for the next 10 years? Assume the deposits before retirement and withdrawals after retirement all occur at beginning of year.

Subjects