Tom Is Talking to His Friend Bob, Who Has an Interest

question 62

Multiple Choice

Tom is talking to his friend Bob, who has an interest in Freedom, LLC, about purchasing his LLC interest. Bob's outside basis in Freedom, LLC is $10,000. This includes his$2,500 one-fourth share of the LLC's debt. Bob's 704(b) capital account is $17,000. If Tom bought Bob's LLC interest for $17,000, what would Tom's outside basis be in Freedom, LLC?

• A) $10,000.
• B) $19,500.
• C) $14,500.
• D) $17,000.

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Definitions:

Cost-Benefit Decision

The process of comparing the costs and benefits associated with a decision, project, or investment, to determine its feasibility or profitability.

Customer Profitability

The profit that a company makes from serving a particular customer or client group over time.

Gross Margin

The difference between sales revenue and the cost of goods sold, representing the profitability of selling inventory.

Servicing Cost

The costs associated with maintaining and repairing products or equipment, contributing to the total cost of ownership.