### How do you calculate the llcs taxable income

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##### Reference no: EM13125516

Jay transferred his farm land to an LLC in exchange for a 50% interest in the capital, profits and losses. His basis in the land was \$600,000 and its fair market value was \$1,000,000. At the time of the transfer there was \$20,000 in real estate taxes payable. Ira contributed \$1,000,000 cash and received a 50% interest in capital, profits and losses. The land was subdivided into 40 lots priced at \$75,000 each. In year 1 the partnership had cash disbursements as follows: \$20,000 for the accrued real estate taxes, \$800,000 for land development, \$140,000 for advertising, and \$20,000 for the accrued taxes. Selling expenses of \$5,000 per lot were paid as each lot was sold. In year 2, the only expenses were \$5,000 selling expense for each lot sold, \$40,000 property taxes, and \$30,000 in advertising. In year 1 the LLC sold 25 lots at the asking price. In year 2 the LLC sold the remaining 15 lots for the asking price.

How do you calculate the LLC's taxable income for each of the two years?

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