Marcie is a 40% member of the M&A LLC. Her basis is $40,000 immediately before the LLC distributes to her $30,000 of cash and land (basis to the LLC of $20,000 and fair market value of $25,000). As a result of the proportionate, nonliquidating distribution, Marcie recognizes a gain of $15,000 and her basis in the land equals its fair market value of $25,000.

Question

Quizplus · Accepted Answer

In a nonliquidating distribution, Marcie does not recognize a gain unless the cash received exceeds her basis in the LLC. Her basis in the land is the lesser of the LLC's basis in the land or her remaining basis after the cash distribution, not its fair market value.

Marcie Is a 40% Member of the M&A LLC