When High Horizon LLC was formed, Maude contributed the following assets in exchange for a 25 percent

Question:

When High Horizon LLC was formed, Maude contributed the following assets in exchange for a 25 percent capital and profits interest in the LLC:

Maude:________________Basis Fair ___________________Market Value

Cash...........................$ 20,000....................................$ 20,000

Land*..........................100,000.....................................360,000

Totals ..........................$ 120,000 ...............................$ 380,000

*Nonrecourse debt secured by the land equals $160,000

James, Harold and Jenny each contributed $220,000 in cash for a 25% profits and capital interest.

a. How much gain or loss will Maude and the other members recognize?

b. What is Maude's tax basis in her LLC interest?

c. What tax basis do James, Harold, and Jenny have in their LLC interests?

d. What is High Horizon's tax basis in its assets?

e. Following the format in Exhibit 20-2, prepare a tax basis balance sheet for the High Horizon LLC showing the tax capital accounts for the members?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...