1 Donna Purchased Dennis One Third Interest Of The Def Llc Which Is Taxed As A Partn 2411862
1. Donna purchased Dennis’ one-third interest of the DEF LLC (which is taxed as a partnership) for $125,000. In connection with Donna’s purchase, the LLC made a § 754 election. The DEF LLC uses the accrual method of accounting with respect to sales of inventory and the cash method with respect to the provision of services. When Donna purchased her one-third interest, the DEF LLC’s assets and capital accounts were as follows:
Assets
Adjusted Basis
F.M.V.
Capital Accounts
Adjusted Basis
F.M.V
Cash
$9,000
$9,000
D
$75,000
$125,000
Accounts Receivable
$6,000
$36,000
E
$75,000
$125,000
Inventory
$60,000
$120,000
F
$75,000
$125,000
Land
$45,000
$30,000
Building
$105,000
$180,000
$225,000
$375,000
$225,000
$375,000
The land and building are § 1231 assets. The building has accumulated depreciation of $75,000 taken on a straight-line basis.
a. What are the tax consequences to Dennis (the seller)?
b. Determine the § 743(b) special basis for each of the LLC’s assets with respect to Donna (the purchaser).
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