Question

When Padgett Properties LLC was formed, Nova contributed land (value of $246,000 and basis of $61,500) and $123,000 cash, and Oscar contributed cash of $369,000. Both members received a 50% interest in LLC profits and capital

. a. How is the land recorded for § 704(b) book capital account purposes?

For § 704(b) book capital account purposes, Padgett records the land at $ .

b. What is Padgett's tax basis in the land? $

c. If Padgett sells the land several years later for $369,000, how much tax gain will Nova and Oscar report?

Nova Reports $ Gain and oscar gain is$

Answer 1

. a. How is the land recorded for § 704(b) book capital account purposes?
For § 704(b) book capital account purposes, Padgett records the land at $246,000  (Equals to Fair Value)
b. What is Padgett's tax basis in the land?
Land = $61,500
c. If Padgett sells the land several years later for $369,000, how much tax gain will Nova and Oscar report?
Post contribution Gain = $369,000 - $246,000	$ 123,000.00
Pst-contribution gain is allocated equally between the partners according to their 50/50% profit-sharing ratio
Oscar = $123,000 x 50% (Post contribution)	$   61,500.00
Nova 's gain = (50% of post contribution gain + pre-contribution gain) = 50% x 123,000 + ($246,000 - $61500)	$ 246,000.00