1-M. Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $59,000 nonrecourse loan from First Bank at the time it is formed. Brett contributes cash of $9,500 and a building he bought as a storefront for the motorcycles. The building has an FMV of $54,000 and an adjusted basis of $39,000 and is secured by a $44,000 nonrecourse mortgage that the LLC will assume. What is Brett's outside tax basis in his LLC interest?

Multiple Choice

• $46,500
• $53,500
• $51,500
• $58,500

1-N. Tom is talking to his friend Bob, who has an interest in Freedom, LLC, about purchasing his LLC interest. Bob's outside basis in Freedom, LLC, is $5,000. This includes his $1,500 one-fourth share of the LLC's debt. Bob's 704(b) capital account is $12,000. If Tom bought Bob's LLC interest for $7,000, what would Tom's outside basis be in Freedom, LLC?

Multiple Choice

• $5,000
• $5,500
• $7,000
• $8,500

1-O. On 12/31/X4, Zoom, LLC, reported a $67,500 loss on its books. The items included in the loss computation were $35,000 in sales revenue, $20,000 in qualified dividends, $27,000 in cost of goods sold, $55,000 in charitable contributions, $25,000 in employee wages, and $15,500 of rent expense. How much ordinary business income (loss) will Zoom report on its X4 return?

Multiple Choice

• ($8,000)
• ($32,500)
• ($67,500)
• ($102,500)

1-P. Kim received a one-third profits and capital interest in Bright Line, LLC, in exchange for legal services she provided. In addition to her share of partnership profits or losses, she receives a $40,000 guaranteed payment each year for ongoing services she provides to the LLC. For X4, Bright Line reported the following revenues and expenses: sales$160,000, cost of goods sold$100,000, depreciation expense$56,000, long-term capital gains$25,000, qualified dividends$7,000, and municipal Bond interest$4,000. How much ordinary business income (loss) will Bright Line allocate to Kim on her Schedule K-1 for X4?

Multiple Choice

• ($19,000)
• $8,000
• $11,000
• $19,000
• None of the choices will be reported as ordinary business income (loss) on Schedule K-1.