Corneille is a 25% owner in the NICE LLC (a calendar year entity). At the end of the last tax year, Corneille's basis in this interest was $40,000, including the $10,000 share of LLC liabilities. On July 1 of the current tax year, Corneille sells the LLC interest to Ingram for $50,000 cash. In addition, Inga assumes Corneille's share of LLC liabilities, which, at that date, was $15,000. During the current tax year, NICE's taxable income is $100,000 (earned evenly during the year). Corneille's share of the LLC's unrealized receivables is valued at $5,000 ($0 basis). At the sale date, what is Corneille's basis in LLC interest, how much gain or loss must be recognized, and what is the character of the gain or loss?
Corneille is a 25% owner in the NICE LLC (a calendar year entity). At the end of the last tax year, Corneille's basis in this interest was $40,000, including the $10,000 share of LLC liabilities. On July 1 of the current tax year, Corneille sells the LLC interest to Ingram for $50,000 cash. In addition, Inga assumes Corneille's share of LLC liabilities, which, at that date, was $15,000. During the current tax year, NICE's taxable income is $100,000 (earned evenly during the year). Corneille's share of the LLC's unrealized receivables is valued at $5,000 ($0 basis). At the sale date, what is Corneille's basis in LLC interest, how much gain or loss must be recognized, and what is the character of the gain or loss?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Corneille is a 25% owner in the NICE LLC (a calendar year entity). At the end of the last tax year, Corneille's basis in this interest was $40,000, including the $10,000 share of LLC liabilities. On July 1 of the current tax year, Corneille sells the LLC interest to Ingram for $50,000 cash. In addition, Inga assumes Corneille's share of LLC liabilities, which, at that date, was $15,000. During the current tax year, NICE's taxable income is $100,000 (earned evenly during the year). Corneille's share of the LLC's unrealized receivables is valued at $5,000 ($0 basis). At the sale date, what is Corneille's basis in LLC interest, how much gain or loss must be recognized, and what is the character of the gain or loss?
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