Problem 21-35 (a) (LO. 6, 7, 9, 10) Nol and Tu share equally in the profits, losses, and capital of the accrual basis NT Products LLC. The LLC does not need to report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Nol 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, Noi's capital account has a balance of $427,000, and the LLC has debts of $115,000 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 NT's operations for the current year is obtained from the LLC's records: Ordinary income $562,000 Dividend Income 8,000 18,000 Long-term capital loss Long-term capital gain Charitable contribution 22,000 4,000 Cash distribution to Noi 11,000 Year-end LLC debt payable to unrelated parties is $80,000. Assume all transactions are reflected in her beginning capital account and tax basis in the same manner. All NT Products' activities are eligible for the qualified business income deduction. What is Nol's basis in her LLC interest: a. Noi's basis in the LLC interest at the beginning of the year is $ Check My Wor 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 tic the partner's basis is adjusted for numerous items. b. Noi's basis in the LLC Interest at the end of the year is s d. Based on the information provided, what other calculations is Noi required to make? Noi may be eligible to deduct up to 20 % of the ordinary income as qualified business income under 5 199A, and will make that calculation on her return. This deduction does not require a cash outflow by Nol or the LLC, and it does not affect her basis or capital account. As someone treated as a general partner, Nol's distributive share of the LLC's ordinary business income is subject to self-employment tax and possibly the additional Medicare tax. Her net investment income from the LLC may be subject to the additional tax under 5 1411. Feedback Check My Won Correct e. Prepare Noi's capital account rollforward from the beginning to the end of the tax year, How does her ending capital account differ from her ending basis as calculated in part (a)? Capital account balance, beginning Year 427,000 Ordinary income 281,000 Dividend income 4,000 V Net long-term capital gain 2,000 V 287,000 / 714,000 Charitable contribution 2,000 Cash distribution to Amy 11,000 13,000 Capital account balance, end of Year Nol's capital account differs from her basis only by the amount of her share of LLC liabilities