Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $50,000 nonrecourse loan from First Bank at the time it is formed. Brett contributes cash of $5,000 and a building he bought as a storefront for the motorcycles. The building has a FMV of $45,000, anadjusted basis of $30,000, and is secured by a $35,000 nonrecourse mortgage that theLLC will assume. What is Brett's outside tax basis in his LLC interest?
A) $37,500.
B) $45,000.
C) $42,500.
D) $40,000.

Question

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The Answer of Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $50,000 nonrecourse loan from First Bank at the time it is formed. Brett contributes cash of $5,000 and a building he bought as a storefront for the motorcycles. The building has a FMV of $45,000, anadjusted basis of $30,000, and is secured by a $35,000 nonrecourse mortgage that theLLC will assume. What is Brett's outside tax basis in his LLC interest?
A) $37,500.
B) $45,000.
C) $42,500.
D) $40,000.

Erica and Brett Decide to Form Their New Motorcycle Business