Problem 21-43 (LO. 7, 8, 11)

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. Phoenix holds all land for investment.

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. A few years later, Phoenix sold the land contributed by Reece for $84,000.

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

Problem 21-51 (LO. 3, 7, 9, 10)

Suzy contributed assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in Suz-Anna GP (a general partnership in which both partners are active owners). Anna contributed land and a building valued at $640,000 (basis of $380,000) in exchange for the remaining 60% interest. Anna's property was encumbered by qualified nonrecourse financing of $100,000, which was assumed by the partnership.

The partnership reports the following income and expenses for the current tax year:

Sales	$560,000
Utilities, salaries, depreciation, and other operating expenses	360,000
Short-term capital gain	10,000
Tax-exempt interest income	4,000
Charitable contributions (cash)	8,000
Distribution to Suzy	10,000
Distribution to Anna	20,000

During the current tax year, Suz-Anna refinanced the land and building (i.e., the original $100,000 debt was repaid and replaced with new debt). At the end of the year, Suz-Anna held recourse debt of $100,000 for partnership accounts payable (recourse to the partnership but not personally guaranteed by either of the partners) and qualified nonrecourse financing of $200,000.

a. Suzy's beginning basis in her partnership interest is $, and Anna's basis is $.

b. Enter the amounts and line number for the following items that will appear on Suzy's Schedule K-1.

Item	Amount	Line on Sch. K-1
Ordinary income	$
Short-term capital gain	$
Tax-exempt interest income	$
Charitable contributions	$	13
Distribution received by Suzy	$

What income, deduction, and taxes does Suzy report on her tax return? On her tax return, Suzy reports the ordinary income on Schedule A . She reports the short-term capital gain on Schedule A . She reports the charitable contributions Schedule A with her personal charitable contributions. Suzy might also be eligible for the qualified business income deduction; the partnership needs to provide additional information regarding W-2 wages and distributions so Suzy can calculate the deduction. Suzy is subject to self-employment taxes.

c. Assume all partnership debts are shared proportionately.

Suzy's year-end basis in her partnership interest is $, and Suzy's amount at risk is $.

a. Regarding the land sale, how much is recognized and how is it allocated?

On the land sale, under 704(c), $ of unrealized gain or loss at the contribution date on property contributed for an LLC interest is allocated to .

b. Complete the balance sheet reflecting basis and fair market value for the LLC immediately after the land sale.

Assets	Basis	FMV	Partners' Capital	Basis	FMV
Cash	$	$	Interest, Phoebe	$	$
Land	$	$	Interest, Parker	$	$
			Interest, Reece	$	$
	$	$		$	$

c. Prepare schedules that roll the partners' capital accounts forward from before to immediately after the sale. Prepare two schedules: tax basis and fair market value.

If an amount is none, enter "0".

		Total	Phoebe	Parker	Reece
Balance before sale		$	$	$	$
Less: Built-in loss on land		$	$	$	$
Less: Loss on land after
	contribution date	$	$	$	$
Balance after sale		$	$	$	$

Prepare the schedule that shows the computation of the fair market value of each LLC member's capital account.

		Total	Phoebe	Parker	Reece
Before sale		$	$	$	$
Less: Loss on land after
	contribution date	$	$	$	$
Balance after sale		$	$	$	$