At the beginning of the tax year, Melodie's basis in the MIP LLC was $94,000, including her $61,100 share of the LLC's liabilities. At the end of the year, MIP distributed to Melodie cash of $14,100 and inventory (basis of $11,280, fair market value of $14,100). In addition, MIP repaid all of its liabilities by the end of the year.

a. If this is a proportionate current distribution, what is the tax effect of the distribution to Melodie and MIP? After the distribution, what is Melodie's basis in the inventory and in her MIP interest?

If this is a proportionate current distribution, the cash distribution plus relief of liabilities decrease Melodie's basis to $fill in the blank ce4eaff9afd3016_2 .

b. After the distribution of inventory, what is Melodie's basis in the inventory and in her MIP interest?

Basis in inventory	$fill in the blank ce4eaff9afd3016_3
Basis in MIP	$fill in the blank ce4eaff9afd3016_4

Answer rating: 100% (QA)

a Melodie is treated as receiving cash distributio... View the full answer