Question: Jokan contributes a nondepreciable asset to the Mahali LLC in

Jokan contributes a nondepreciable asset to the Mahali LLC in exchange for a one-fourth (25%) interest in the capital, profits, and losses of the LLC. The asset has an adjusted tax basis to Jokan and the LLC of $60,000 and a fair market value and § 704(b) "book" basis on the contribution date of $150,000. The asset is encumbered by a nonrecourse note of $80,000 that has not been guaranteed by any of the LLC members.
Under § 704(c) principles, how much of the nonrecourse debt is allocated to Jokan and what is the amount of Jokan's basis in the LLC interest following the contribution?



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  • CreatedSeptember 09, 2015
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