Question

Lance contributed investment property worth $660,000, purchased Three years ago for $337,500 cash, to Cloud Peak...

Lance contributed investment property worth $660,000, purchased Three years ago for $337,500 cash, to Cloud Peak LLC in exchange for an 90 percent profits and capital interest in the LLC. Cloud Peak owes $452,500 to its suppliers but has no other debts.

a. What is Lance’s tax basis in his LLC interest?

b. What is Lance’s holding period in his interest?

c. What is Cloud Peak’s basis in the contributed property?

d. What is Cloud Peak’s holding period in the contributed property?

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Answer #1

Answer-(a) $ 744,750.

Lance’s basis in his LLC interest is made up of the $337,500 basis of the investment property he transferred to the LLC and his $407,250 share of the LLC debt ($452,500 x 90%). Because LLC general debt obligations are treated as nonrecourse debt , Lance’s profit sharing ratio is used to allocate a portion of the LLC debt to him.

Answer-(b) Three Years.

Because Lance contributed a capital assets , the holding period of the contributed assets tacks onto his partnership interest.

Answer-(c ) $337,500.

The LLC takes a carryover basis in the contributed property.

Answer-(d) Three Years.

The LLC inherits Lance’s holding period in the contributed property.

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