Erica and Brett Decide to Form Their New Motorcycle Business

question 85

Multiple Choice

Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $50,000 nonrecourse loan from First Bank at the time it is formed. Brett contributes cash of $5,000 and a building he bought as a storefront for the motorcycles. The building has a FMV of $45,000, an adjusted basis of $30,000, and is secured by a $35,000 nonrecourse mortgage that the LLC will assume. What is Brett's outside tax basis in his LLC interest?

• A) $37,500.
• B) $40,000.
• C) $42,500.
• D) $45,000.

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Definitions:

Frontal Suture

A fibrous joint that divides the two halves of the frontal bone of the skull in infants and children, usually fusing during adulthood.

Sagittal

Relating to or denoting an anatomical plane that divides the body into right and left parts, typically used in medical and biological contexts.

Lambdoid

Pertaining to the lambdoidal suture, the cranial suture between the parietal bones and the occipital bone.

Coronal

Pertaining to the plane dividing the body into anterior and posterior portions, also referred to as the frontal plane.