Question

Tom is talking to his friend Bob, who has an interest in Freedom, LLC, about purchasing his LLC interest. Bob's outside basis in Freedom, LLC, is $13,500. This includes his $3,200 one-fourth share of the LLC's debt. Bob's 704(b) capital account is $20,500. If Tom bought Bob's LLC interest for $24,000, what would Tom's outside basis be in Freedom, LLC

Answer 1

Tom's outside bases in freedom = $27,200

Step-by-step explanation:

To find Tom's outside bases in freedom, use the formula:

Tom's outside bases in freedom = Amount paid for interest + share of LLC’s Debt

Where,

Amount paid for interest = $24,000

Share of LLC's debt = $3,200

Therefore, Tom's outside bases in freedom would be:

Tom's outside bases in freedom = Amount paid for interest + share of LLC’s Debt

= $24,000 + $3,200

= $27,200

Tom's outside bases in freedom is $27,200