In a Proportionate Liquidating Distribution of His 40% Interest in the RST

question 147

Essay

In a proportionate liquidating distribution of his 40% interest in the RST LLC, Stuart received cash ($100,000), land (basis of $60,000 and value of $90,000), and inventory (basis of $30,000 and value of $40,000). In addition, Stuart is relieved of his $80,000 share of the LLC's liabilities. Stuart's basis in RST (including his share of LLC liabilities) was
$200,000 immediately prior to this distribution.

a. How much gain or loss does Stuart recognize on this distribution?
b. What is Stuart's basis in the land and inventory he receives in the distribution?

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Definitions:

Prime Mover

A muscle or group of muscles whose contraction is chiefly responsible for producing a particular movement.

Dactylospasm

A medical condition characterized by involuntary, spasmodic contractions of the fingers or toes.

Contracture

The stiffening or loss of flexibility in a joint or muscle caused by scar tissue, often from lack of movement or use.

Cramp

A sudden, involuntary muscle contraction that is often painful, commonly affecting the legs and feet.