Frank and Bob are equal members in Soxy Socks, LLC. When forming the LLC, Frank contributed $50,000 in cash and $50,000 worth of equipment. Frank's adjusted basis in the equipment was $35,000. Bob contributed $50,000 in cash and $50,000 worth of land. Bob's adjusted basis in the land was $30,000. On 3/15/X4, Soxy Socks sells the land Bob contributed for $60,000. How much gain (loss) related to this transaction will Bob report on his X4 return? A) $10,000. B) $15,000. C) $25,000. D) $35,000.

Question

Elliot Mcdowell

Business

7 June, 22:35

Frank and Bob are equal members in Soxy Socks, LLC. When forming the LLC, Frank contributed $50,000 in cash and $50,000 worth of equipment. Frank's adjusted basis in the equipment was $35,000. Bob contributed $50,000 in cash and $50,000 worth of land. Bob's adjusted basis in the land was $30,000. On 3/15/X4, Soxy Socks sells the land Bob contributed for $60,000. How much gain (loss) related to this transaction will Bob report on his X4 return? A) $10,000. B) $15,000. C) $25,000. D) $35,000.

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Answers (1)

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Evelin Preston · Answer 1

c. $25,000

Explanation:

The computation of gain (loss) is shown below:-

Land value $50,000

Less: Bob adjusted basis $30,000

Built in gain allocated to Bob $20,000

Sales consideration $60,000

Less: Land value $50,000

Gain to be allocated between

two members $10,000

Total gain allocated to Bob

($20,000 + $10,000 * 50%) $25,000