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.

Grasp the concepts and financial implications of issuing bonds at a premium or discount.

Recognize the methods and reasons for early retirement of bonds.

Comprehend the mechanics and effects of bond conversion on company finances.

Learn the impact of bond issuance on company cash flows and ownership control.

---

Definitions:

Unemployment Rate

The percentage of the labor force that is jobless and actively seeking employment.

Reaganomics

The economic policies promoted by U.S. President Ronald Reagan during the 1980s, characterized by tax cuts, reduced social spending, increased military spending, and deregulation of domestic markets.

Deregulation

The process of removing or reducing state regulations, typically in the economic sphere, to encourage more efficient and competitive markets.

S & L Institutions

Savings and Loan institutions, which are financial establishments focusing on accepting savings deposits and making mortgage loans.