What are the partners respective shares of the bank loan

Assignment Help Accounting Basics
Reference no: EM131321207

1. A, B and C are the members of All, LLC, a limited liability company that is treated as a partnership for federal income tax purposes. All, LLC is contemplating taking a loan of $90,000 from a local Maryland bank to finance acquisition of the newest generation of river rafts for use in its operation on the Middle River, not asking for personal guarantees. After careful review, A does not see where the loan agreement limits her personal exposure and demands that B and C indemnify her from liability on the loan. B, in turn, demands an indemnity from C with respect to any amount that she is required to pay to A (although not with respect to any amount she is required to pay to the bank). If the requested indemnities are given, what are the partners' respective shares of the bank loan allocated to their outside basis? Also: Indicate how the loan should be considered allocated - recourse or non-recourse. Explain why.

2. Richard and two friends from law school recently formed Richard and Associates as a limited liability partnership (LLP). Income from the partnership will be split equally among the partners. The partnership will generate fee income primarily from representing clients in bankruptcy and foreclosure matters. While some attorney friends have suggested that partners' earnings will be self-employment income, other attorneys they know from their local bar association meetings claim just the opposite.

After examining relevant authority, explain how you would advise Richard and Associates on this matter.

a) Is Richard and Assoc proposed special allocation acceptable under current tax rules? Why or why not?

b) If the IRS ultimately disagrees with Richard and Assoc special allocation, how will it likely reallocate the taxable and tax-exempt interest among the members?

3. J has a one-third capital and profits interest in the General Partnership. On January 1, year 1, General has $120,000 of general debt obligations, and J has a $50,000 tax basis (including his share of General's debt) in his partnership interest. During the year, General incurred a $30,000 nonrecourse debt that is not secured by real estate. Because General is a rental real estate partnership, J is deemed to be a passive participant in General. His share of the General losses for year 1 is $75,000. J is not involved in any other passive activities, and this is the first year he has been allocated losses from General.

a) Determine how much of the General loss J will currently be able to deduct on his tax return for year 1, and list the losses suspended due to tax basis, at-risk, and passive activity loss limitations.

b) If J sells his interest on January 1, year 2, what happens to his suspended losses from year 1?

Reference no: EM131321207

Questions Cloud

Calculate pearson correlation coefficient between variables : Calculate the Pearson correlation coefficient between the variables. Was your hypothesis about the nature of the correlation supported?
Is it reasonable to create a chawk by deriving from cbird : Is it reasonable to create a CHawk by deriving from CBird? How about a COstrich ? Justify your answers. Derive an avian hierarchy that can cope with both of these birds
Conservation of momentum for an inelastic collision : A 34kg cannonball is fired at dimitri who weighs 136 kg. if the cannonball is fired with an initial velocity of 8.9m/s with what speed does the combination of dimitri and the cannonball tumble backwards? Use conservation of momentum for an inelast..
What are a linear relationship and curvilinear relationship : When are correlational research designs used in behavioral research? What are their advantages and disadvantages?
What are the partners respective shares of the bank loan : A, B and C are the members of All, LLC, a limited liability company that is treated as a partnership for federal income tax purposes. If the requested indemnities are given, what are the partners' respective shares of the bank loan allocated to th..
Prepare a balance sheet as of december 31 : 1. Prepare an income statement for the year ended December 31 - Prepare a statement of owner's equity for the year ended December 31. No additional investments were made during the year and Prepare a balance sheet as of December 31.
Design pre-post conditions for required operations : Design Pre/Post conditions for required operations; A recursive method named postfix that outputs the expression represented by a non-empty expression tree in postfix format.
How many electron hole pairs are generated per unit : Verify that the photon energy Is 2.25eV. How many electron-hole pairs are generated per unit volume per second in each crystal?
Why does the tilt of the earth cause the seasons : Why does the tilt of the Earth cause the seasons? It seems to me like the distance from the Earth to the Sun should cause the seasons.

Reviews

Write a Review

 

Accounting Basics Questions & Answers

  C owns 60 shares and d owns 40 shares of z corporation

c owns 60 shares and d owns 40 shares of z corporation representing all of zs outstanding shares. c and d are unrelated

  Market for loanable funds

Firms care about their after-tax rate of return on investment projects. In the market for loanable funds, draw a graph and explain the effect of an increase in taxes on business profits.

  Younger bus lines uses the units-of-activity method in

younger bus lines uses the units-of-activity method in depreciating its buses. one bus was purchased on january 1 2010

  Of the three methods of estimating costs regression account

1. please define both disruptive technology and sustaining technology. then besides the examples in the article provide

  Identify which of the cardinal relationships apply

Identify which of the cardinal relationships apply, from the following Component part product Customer  product

  Determine the actual cost of a good

Describe three issues/problems that a company could encounter when trying to determine the actual cost of a good or service to be used in the cost of goods sold. For each of your issues, provide an example of a company or industry where these issu..

  Do you think that acores policy of allocating the same

suppose acore pharmaceuticals has four sales representatives assigned to the state of arizona. these sales reps are

  Caterpillar inc reported the following accounts and amounts

caterpillar inc. reported the following accounts and amounts in millions in its december 31 2008 year-end financial

  All raw materials are considered to the manufacturing

lang productions had the following beginning and ending inventory balances for april 2009. 4109 43009 raw material

  Total static-budget variance

What is the total static-budget variance? A. $5,200 favorable b. $3,320 favorable c. $1,880 unfavorable d. $1,880 favorable 250. _______________ is a carefully predetermined amount usually expressed on a per-unit basis.

  Source of common-mode gain

If the only source of common-mode gain when the output is taken differentially is the mismatch in collector resistances, what must this mismatch be (in percent)?

  Summary entries to record by using installment-sales method

Collections during the year from down payments and installments totaled $300,000. Purchases for the year totaled $400,000; the cost of merchandise on hand at the end of the year was $80,000. Instructions: Using the installment-sales method, make s..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd