In a Proportionate Current (Nonliquidating) Distribution of His 30% Interest

question 228

Essay

In a proportionate current (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:

Capillary Growth

the process of increase in the size or number of capillaries, often seen in biological tissues during healing or development.

Equilibrium

A state in which opposing forces or influences are balanced so that no changes occur, or in a chemical context, when the rate of the forward reaction equals the rate of the backward reaction.

Energy of Activation

The minimum amount of energy that reacting species must possess in order to undergo a specified chemical reaction.

Equilibrium

A state in which the forward and reverse reactions occur at equal rates in a chemical reaction, resulting in no net change in the concentration of reactants and products.