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Marcus and Madison are equal members of an LLC. On January 1 of the current year,...

Marcus and Madison are equal members of an LLC. On January 1 of the current year, to acquire a one-third interest in the entity, Nora contributed a parcel of land she had held for investment. (At this time, the entity will be renamed MMN, LLC.) Nora had purchased the land for $120,000; its fair market value was $90,000 at the contribution date.

A few years later, the LLC sells Nora’s land for $84,000. At the beginning of that year, Nora’s tax basis capital account was $200,000 and Marcus and Madison’s tax basis capital accounts were $170,000.

  1. How much is the recognized gain or loss? How is it allocated among the LLC members?

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Answer #1
Partners Marcus Madison Nora
Share in LLC 0.33 0.33 0.33
FMV as on 01.01 90000
Land Sold 84000
Loss to the LLC 6000
Capital 170000 170000 200000
Contribution in Loss -2000 -2000 -2000
Capital after adjusting tax 168000 168000 198000
Note:- 1. The loss has been calculated after deducting Selling price of land from FMV of land.

2. Loss has been divided in ratio of shares held by partners in LLC
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