Last Year, Darby Contributed Land (Basis of $60,000 and Fair

question 39

Multiple Choice

Last year, Darby contributed land (basis of $60,000 and fair market value of $80,000) to the Seagull LLC in exchange for a 25% interest in the LLC. In the current year, the LLC distributes the land (now worth $82,000) to Shelby, who is also a 25% owner. Immediately prior to the distribution, Darby's basis in the LLC was $70,000, while Shelby's basis in the LLC was $110,000. How much gain or loss must be recognized and by whom? What is Shelby's basis in the property she receives and Darby's basis in her partnership interest following the distribution?

• A) No gain or loss; Shelby's basis in the property is $80,000; Darby's basis in interest is $70,000.
• B) $20,000 gain recognized by Darby; Shelby's basis in the property is $80,000; Darby's basis in interest is $90,000.
• C) $22,000 gain recognized by Darby; Shelby's basis in the property is $82,000; Darby's basis in interest is $92,000.
• D) $20,000 gain recognized by Shelby; Shelby's basis in the property is $80,000; Darby's basis in interest is $90,000.
• E) $22,000 gain recognized by Shelby; Shelby's basis in the property is $82,000; Darby's basis in interest is $92,000.

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