The BLM LLC's balance sheet on August 31 of the current year is as follows. Adjusted Basis FMV Cash $ 60,000 $ 60,000 Receivables -0- 150,000 Capital assets 90,000 300,000 $150,000 $510,000 Nonrecourse debt $ 90,000 $ 90,000 Barney,capital 20,000 140,000 Lillie,capital 20,000 140,000 Marshall,capital 20,000 140,000 $150,000 $510,000 The nonrecourse debt is shared equally among the LLC members.On that date,Lillie sells her one-third interest to Robyn for $170,000,including cash and relief of Lillie's share of the nonrecourse debt.Lillie's outside basis for her interest in the LLC is $50,000,including her share of the LLC's debt.How much capital gain and/or ordinary income will Lillie recognize on the sale?

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When Lillie sells her one-third interest in the LLC for $170,000, her outside basis is $50,000, which means that she has a capital gain of $120,000 ($170,000 - $50,000). However, because the nonrecourse debt is shared equally among the LLC members, Lillie's share of the debt is $30,000 ($90,000 ÷ 3), and Robyn is relieving her of that debt. As a result, Lillie will also recognize $30,000 of ordinary income ($30,000 relieved nonrecourse debt). Therefore, Lillie's recognized gain will be $70,000 capital gain ($120,000 - $30,000 ordinary income) and $50,000 ordinary income.

The BLM LLC's Balance Sheet on August 31 of the Current