Amy and Mitchell share equally (50%) in the profits, losses, and capital of the accrual basis AM Products LLC. The LLC does not need to report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current tax year, Amy's capital account has a balance of $780,000, and the LLC has debts of $507,000 payable to unrelated parties. All debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. The following information about AM's operations for the current year is obtained from the LLC's records. Operating income* $1,170,000 W-2 wages 200,000 Depreciation expense 300,000 Interest income 11,700 Long-term capital loss 7,800 Long-term capital gain 23,400 Charitable contribution (cash) 11,750 Cash distribution to Amy 58,500 Unadjusted basis of partnership property 1,600,000 immediately after acquisition * Operating income equals revenue less operating expenses (other than expenses listed separately above). Year-end LLC debt payable to unrelated parties is $354,900. Assume that all transactions are reflected in her beginning tax basis in the LLC inbeginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income deduction. a. Calculate Amy's basis in her LLC interest at the beginning and end of the tax year. Use her capital account as a starting point. LLC interest at the beginning of the year: $ LLC interest at the end of the year: $
Amy and Mitchell share equally (50%) in the profits, losses, and capital of the accrual basis AM Products LLC. The LLC does not need to report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current tax year, Amy's capital account has a balance of $780,000, and the LLC has debts of $507,000 payable to unrelated parties. All debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. The following information about AM's operations for the current year is obtained from the LLC's records. Operating income* $1,170,000 W-2 wages 200,000 Depreciation expense 300,000 Interest income 11,700 Long-term capital loss 7,800 Long-term capital gain 23,400 Charitable contribution (cash) 11,750 Cash distribution to Amy 58,500 Unadjusted basis of partnership property 1,600,000 immediately after acquisition * Operating income equals revenue less operating expenses (other than expenses listed separately above). Year-end LLC debt payable to unrelated parties is $354,900. Assume that all transactions are reflected in her beginning tax basis in the LLC inbeginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income deduction. a. Calculate Amy's basis in her LLC interest at the beginning and end of the tax year. Use her capital account as a starting point. LLC interest at the beginning of the year: $ LLC interest at the end of the year: $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Amy and Mitchell share equally (50%) in the profits, losses, and capital of the accrual basis AM Products LLC. The LLC does not need to
report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Amy is a managing
member of the LLC (treated as a general partner) and is a U.S. person.
At the beginning of the current tax year, Amy's capital account has a balance of $780,000, and the LLC has debts of $507,000 payable to
unrelated parties. All debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. The following
information about AM's operations for the current year is obtained from the LLC's records.
Operating income*
$1,170,000
W-2 wages
200,000
Depreciation expense
300,000
Interest income
11,700
Long-term capital loss
7,800
Long-term capital gain
23,400
Charitable contribution (cash)
11,750
Cash distribution to Amy
58,500
Unadjusted basis of partnership property
1,600,000
immediately after acquisition
* Operating income equals revenue less operating expenses (other than expenses listed separately above).
Year-end LLC debt payable to unrelated parties is $354,900. Assume that all transactions are reflected in her beginning tax basis in the LLC
inbeginning capital and basis in the same manner. Also assume that all AM Products' activities are eligible for the qualified business income
deduction.
a. Calculate Amy's basis in her LLC interest at the beginning and end of the tax year. Use her capital account as a starting point.
LLC interest at the beginning of the year: $
LLC interest at the end of the year: $
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