Phoebe and Parker are equal members in Phoenix Investors, LLC. They are real estate investors who formed the LLC several years ago with equal cash contributions. Phoenix then purchased a parcel of land.

On January 1 of the current year, to acquire a one-third interest in the entity, Reece contributed to the LLC some land she had held for investment. Reece purchased the land five years ago for $120,000; its fair market value at the contribution date was $90,000. No special allocation agreements were in effect before or after Reece was admitted to the LLC. Phoenix holds all land for investment.

Immediately before Reeces property contribution, the balance sheet of Phoenix Investors LLC was as follows:

Basis FMV

Land $30,000 $180,000

Phoebe, capital 15,000 90,000

Parker, capital 15,000 90,000

A few years later, Pheonix sold the land contributed by Reece for 84,000

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

B. Prepare a balance sheet reflecting basis and fair market value for the LLC immediately after the land sale. Also prepare schedules that support the basis and fair market value of each LLC members capital account.