Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

******I NEED ONLY C,D,and E answered. Thanks.****** Problem 21-35 (b) (LO. 6, 7, 9, 10) Hayden and Hedvig share equally in the profits, losses, and

******I NEED ONLY C,D,and E answered. Thanks.******

Problem 21-35 (b) (LO. 6, 7, 9, 10)

Hayden and Hedvig share equally in the profits, losses, and capital of the accrual basis HH LLC. The LLC does not need to report financial information to any third parties, so captial accounts are determined using tax rules (rather than GAAP). Hayden is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current year, Hayden's capital account has a balance of $1,420,000, and the LLC has debts of $412,000 payable to unrelated parties. The debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. Assume that all LLC debt is shared equally between the partners. The following information about HH's operations for the current year is obtained from the LLC's records:

Ordinary income $2.800,000
Interest income 122,000
Short-term capital loss 56,000
Long-term capital gain 110,000
Charitable contribution 36,800
Cash distribution to Hayden 209,000

Year-end LLC debt payable to unrelated parties is $376,000. Assume all transactions are reflected in his beginning capital account and tax basis in the same manner. All HH LLC's activities are eligible for the qualified business income deduction. What is Hayden's basis in his LLC interest:

Question Content Area

a. Hayden's basis in the LLC interest at the beginning of the year is $fill in the blank f7578ef31017052_1.

Feedback Area

Feedback

A partner's basis in the LLC interest is important for determining the treatment of distributions from the LLC to the partner, establishing the deductibility of LLC losses, and calculating gain or loss on the partner's disposition of the LLC interest. After the partner is admitted to the LLC, the partner's basis is adjusted for numerous items.

Question Content Area

b. Hayden's basis in the LLC interest at the end of the year is $fill in the blank e3c42eff3f92024_1.

Feedback Area

Feedback

Correct

Question Content Area

c. What income, gains, losses, and deductions does Hayden report on his income tax return?

If an amount is zero, enter "0".

Ordinary income $fill in the blank 04825d02f06204e_1
Net long-term capital gain $fill in the blank 04825d02f06204e_2
Interest income $fill in the blank 04825d02f06204e_3
Charitable contribution deduction $fill in the blank 04825d02f06204e_4
Cash distribution $fill in the blank 04825d02f06204e_5

Feedback Area

Feedback

Partially correct

Question Content Area

d. Based on the information provided, what other calculations is Hayden required to make?

Hayden may be eligible to deduct up to fill in the blank 6a8a67fbe029021_1% of the ordinary income as qualified business income under 199A, and will make that calculation on his return. This deduction

doesdoes not

require a cash outflow by Hayden or the LLC, and it

doesdoes not

affect his basis or capital account. As someone treated as a general partner, Hayden's distributive share of the LLC's ordinary business income

isis not

subject to self-employment tax and possibly the additional Medicare tax. His

capital gainnet investment incomeordinary income

from the LLC may be subject to the additional tax under 1411.

Feedback Area

Feedback

Incorrect

Question Content Area

e. Prepare Hayden's capital account rollforward from the beginning to the end of the tax year. How does his ending capital account differ from his ending basis as calculated in part (a)?

Capital account balance, beginning year $fill in the blank fcd7df01a07d004_1
Ordinary income $fill in the blank fcd7df01a07d004_2
Interest income fill in the blank fcd7df01a07d004_3
Net long-term capital gain fill in the blank fcd7df01a07d004_4
fill in the blank fcd7df01a07d004_5
$fill in the blank fcd7df01a07d004_6
Less:
Charitable contribution $fill in the blank fcd7df01a07d004_7
Cash distribution to Hayden fill in the blank fcd7df01a07d004_8
fill in the blank fcd7df01a07d004_9
Capital account balance, end of year $fill in the blank fcd7df01a07d004_10

Hayden's capital account differs from his basis only by the amount of his share of LLC

assetsliabilitieslossesgainsdistribution

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

South-Western Federal Taxation 2020 Comprehensive

Authors: David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman

43rd Edition

357109147, 978-0357109144

More Books

Students also viewed these Accounting questions