Kevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan...

Kevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan contributed the following assets: Basis Fair Market Value Kevan: Cash $ 15,000 $ 15,000 Land* 120,000 440,000 Totals $ 135,000 $ 455,000 *Nonrecourse debt secured by the land equals $210,000 Each member received a one-third capital and profits interest in the LLC. (Leave no answer blank. Enter zero if applicable. Do not round intermediate calculations.)

Expert Solution

Description	Kevan	Other Members	Explanation

1) Basis in contributed land	120000
2) Cash contributed	15000	245000
3) Nonrecourse mortgage in excess of basis in contributed land	90000		Non recourse debt > basis is allocated only to Kevan
4) Remaining nonrecourse mortgage	40000	40000	33.3% * [$210,000 - (3)]
Basis immediately prior to debt relief	265000
5) Relief from mortgage debt	(210000)
Each member’s initial tax basis in the LLC	55000	285000

Gain or loss will Jerry, Dave and Kevan recognize on the contributions = 0

Kevan’s tax basis in his LLC interest = $55,000

Tax basis Jerry and Dave have in their LLC interests = $285,000 each

Albee LLC’s tax basis in its assets = $625,000.

Albee, LLC takes a $135,000 carryover basis in the assets Kevan contributes and a $490,000 in the total cash the other two members contributed.

jeff jeffy answered 1 year ago

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