The BLM LLC's Balance Sheet on August 31 Reads as Follows

question 16

Multiple Choice

The BLM LLC's balance sheet on August 31 reads as follows. $\begin{array}{lrr}&\text { Adjusted } & \\&\text { Basis } & \text { FMV } \\\text { Cash } & \$ 60,000 & \$ 60,000 \\\text { Receivables } & -0- & 150,000 \\\text { Capital assets } & \underline{90,000} & \underline{300,000} \\& \$ 150,000 & \$ 510,000\\\\\text { Nonrecourse debt } & \$ 90,000 & \$ 90,000 \\\text { Barney, capital } & 20,000 & 140,000 \\\text { Lillie, capital } & 20,000 & 140,000 \\\text { Marshall, capital } &{20,000}& \underline{140,000} \\&{\$ 150,000} & \$ 510,000\end{array}$ The nonrecourse debt is shared equally among the LLC members. On that date, Lillie sells her one-third interest to Robyn for $170,000, including cash and relief of Lillie's share of the nonrecourse debt. Lillie's outside basis for her interest in the LLC is $50,000, including her share of the LLC's debt. How much capital gain and/or ordinary income will Lillie recognize on the sale?

• A) $100,000 capital gain? $50,000 ordinary income.
• B) $120,000 capital gain? $0 ordinary income.
• C) $150,000 capital gain? $0 ordinary income.
• D) $150,000 capital gain? $50,000 ordinary income
• E) $70,000 capital gain? $50,000 ordinary income.

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Definitions:

Commercial Security Division

A branch of a company focused on providing security products and services to businesses and commercial properties.

Transfer Price

The price at which goods and services are sold between divisions within the same company, affecting both divisional performance and overall profitability.

Aircraft Products Division

A specialized business segment within a company focused on the development, manufacturing, and selling of aircraft-related products.

Home Security Division

A specialized segment within a company that focuses on products and services related to securing homes from intruders, fire, and other dangers.