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 an FMV of $45,000and an adjusted basis of $30,000 and is secured by a $35,000 nonrecourse mortgage that the LLC will assume. What is Brett's outside tax basis in his LLC interest?
A)$37,500
B)$40,000
C)$42,500
D)$45,000

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 an FMV of $45,000and an adjusted basis of $30,000 and is secured by a $35,000 nonrecourse mortgage that the LLC will assume. What is Brett's outside tax basis in his LLC interest?
A)$37,500
B)$40,000
C)$42,500
D)$45,000

Erica and Brett Decide to Form Their New Motorcycle Business