Honest Used Cars LLC, which is treated as a partnership for tax purposes, is owned equally by Abraham, Mary, and Sarah. Each has an equal share of the LLC's profits, losses, and capital. The LLC reports its income under the accrual method and uses the LIFO method for inventory valuation. Immediately before Mary selling her 1/3rd interest in the LLC to Thomas, the balance sheet reflects the following: Assets Tax Basis Fair Market Value Cash 25,000 25,000 Inventory at cost 1,300,000 1,400,000 LIFO valuation reserve (500,000) Furniture and Fixtures 200,000 Accumulated depreciation (175,000) 85,000 Building 100,000 75,000 Accumulated depreciation (20,000) Land 90,000 125,000 Goodwill 90,000 Total Assets 1,020,000 1,800,000 Current liabilities Floor plan debt Capital - Abe Capital - Mary Capital - Sarah 90,000 690,000 80,000 80,000 80,000 1,020,000 90,000 690,000 340,000 340,000 340,000 1,800,000 No member of the LLC has personal liability for the current liabilities, but each is personally liable for their 1/3d share of the floor plan debt due to a guaranty required by the lender. Assume the balance sheet reflects the LLC's current year items of income, gain, loss and deduction through the date of Mary's sale, the bank agreed to substitute Thomas for Mary in the guaranty agreement, and there is no minimum gain associated with the current liabilities. Thomas paid Mary $340,000 in cash for her interest. Requirements 1. Compute Mary's share of the LLC's liabilities and her outside basis- 2. Compute the gain Mary will recognize on the sale, and the amounts that will be reported by her as ordinary income and capital gaine 3. State the amount, if any, of Mary's capital gain that is taxable as unrecaptured $ 1250 gaine Honest Used Cars LLC, which is treated as a partnership for tax purposes, is owned equally by Abraham, Mary, and Sarah. Each has an equal share of the LLC's profits, losses, and capital. The LLC reports its income under the accrual method and uses the LIFO method for inventory valuation. Immediately before Mary selling her 1/3rd interest in the LLC to Thomas, the balance sheet reflects the following: Assets Tax Basis Fair Market Value Cash 25,000 25,000 Inventory at cost 1,300,000 1,400,000 LIFO valuation reserve (500,000) Furniture and Fixtures 200,000 Accumulated depreciation (175,000) 85,000 Building 100,000 75,000 Accumulated depreciation (20,000) Land 90,000 125,000 Goodwill 90,000 Total Assets 1,020,000 1,800,000 Current liabilities Floor plan debt Capital - Abe Capital - Mary Capital - Sarah 90,000 690,000 80,000 80,000 80,000 1,020,000 90,000 690,000 340,000 340,000 340,000 1,800,000 No member of the LLC has personal liability for the current liabilities, but each is personally liable for their 1/3d share of the floor plan debt due to a guaranty required by the lender. Assume the balance sheet reflects the LLC's current year items of income, gain, loss and deduction through the date of Mary's sale, the bank agreed to substitute Thomas for Mary in the guaranty agreement, and there is no minimum gain associated with the current liabilities. Thomas paid Mary $340,000 in cash for her interest. Requirements 1. Compute Mary's share of the LLC's liabilities and her outside basis- 2. Compute the gain Mary will recognize on the sale, and the amounts that will be reported by her as ordinary income and capital gaine 3. State the amount, if any, of Mary's capital gain that is taxable as unrecaptured $ 1250 gaine