On January 2 of the current year, Fenton and Myers form the FM LLC. Their contributions...
On January 2 of the current year, Fenton and Myers form the FM LLC. Their contributions to the LLC are as follows.
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Within 30 days of formation, FM collects the receivables and sells the inventory for $93,750 cash.
FM realized the following income in the current year from these
transactions:
• Ordinary income of $ from collecting cash basis
accounts receivable.
• Ordinary income of $ from sale of inventory.
Homework Answers
ANSWER
| Adjusted Basis | Fair Market Value | Income Recognized | ||
| From Fenton | Character | |||
| Cash | 75,000 | 75,000 | ||
| Accounts Receivable | 0 | 135,000 | 135,000 | ordinary Income |
| Inventory | 37,500 | 93,750 | 56,250 | ordinary Income |
| From Myers | ||||
| Cash | 303,750 | 303,750 | ||
| 1 | Ordinary Income | $135,000 | from collecting cash basis accounts receivable | |
| 2 | Ordinary Income | $56,250 | from sale of inventory | |
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