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On December 15, 2020, Donald contributed a Picasso painting to Kennedy, LLC that was valued at $100,000 (basis of $5,000) in exchange for a 50%
On December 15, 2020, Donald contributed a Picasso painting to Kennedy, LLC that was valued at $100,000 (basis of $5,000) in exchange for a 50% capital and profits interest in the LLC. Joe contributed $100,000 in cash and received a 50% interest in the LLC. On December31, Donald withdrew $50,000 in cash from the LLC and then on January 15, 2021, Joe purchased Donalds entire interest in the LLC for $50,000 and the partnership distributed the painting to Joe on February 14, 2021. What adjustments if any might the IRS make? Explain the consequences of such an adjustment to Joe & Donald and how this could have been prevented.
On December 15, 2020, Donald contributed a Picasso painting to Kennedy, LLC that was valued at $100,000 (basis of $5,000) in exchange for a 50% capital and profits interest in the LLC. Joe contributed $100,000 in cash and received a 50% interest in the LLC. On December31, Donald withdrew $50,000 in cash from the LLC and then on January 15, 2021, Joe purchased Donalds entire interest in the LLC for $50,000 and the partnership distributed the painting to Joe on February 14, 2021.
What adjustments if any might the IRS make?
Explain the consequences of such an adjustment to Joe & Donald and how this could have been prevented.
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Cornerstones of Financial and Managerial Accounting
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen
2nd edition
978-1111879044
