In a Proportionate Nonliquidating Distribution of His 30% Interest in the MNO

question 94

Essay

In a proportionate nonliquidating distribution of his 30% interest in the MNO LLC,Neil received cash ($60,000),land (basis of $40,000 and value of $75,000),and unrealized receivables (basis of $0 and value of $22,000).In addition,Neil is relieved of his $40,000 share of the LLC's liabilities.Neil's basis in MNO (including his share of LLC liabilities) was $80,000 immediately prior to this distribution.
a.How much gain or loss does Neil recognize on this distribution?
b.What is Neil's basis in the receivables and land he receives in the distribution?
c.What is Neil's basis in the LLC interest following the distribution?

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Definitions:

Retail Store

A physical establishment that sells goods or services directly to consumers for their personal or household use.

Product-Design Process

A series of steps that businesses follow to develop, prototype, test, and finalize the design of a new product, focusing on meeting consumer needs and preferences.

Production Order

An authorized instruction or command to begin the manufacturing process of a specific quantity of goods within a scheduled timeframe.

Customer Order

A request made by a customer for the purchase of goods or services provided by a company.