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?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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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