Rondo and his business associate, Larry, are considering forming a business entity called R&L, but they are unsure about whether to form it as a C corporation, an S corporation, or an LLC taxed as a partnership for tax purposes. Rondo and Larry would each invest $200,000 in the business. Thus, each owner would take an initial basis in his ownership interest of $200,000 no matter which entity type is formed. Shortly after the formation of the entity, the business borrowed $60,000 from the bank. If applicable, this debt will be shared equally between the two owners. A. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as a C corporation? B. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as an S corporation? C. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as an LLC and taxed as a partnership?
Rondo and his business associate, Larry, are considering forming a business entity called R&L, but they are unsure about whether to form it as a C corporation, an S corporation, or an LLC taxed as a partnership for tax purposes. Rondo and Larry would each invest $200,000 in the business. Thus, each owner would take an initial basis in his ownership interest of $200,000 no matter which entity type is formed. Shortly after the formation of the entity, the business borrowed $60,000 from the bank. If applicable, this debt will be shared equally between the two owners.
A. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as a C corporation?
B. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as an S corporation?
C. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as an LLC and taxed as a partnership?
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