Brains agree to allocate all income and losses equally

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Reference no: EM131315911

Money contributed $400,000 to the LLC. Brains contributed his research skills. The LLC was formed to create a patentable invention. Under the LLC agreement, Money would be allocated all losses and then would be allocated all profits until he had recovered his prior losses, and thereafter profits and losses were to be shared equally. Neither member has a deficit restoration requirement. Assume the parties have a qualified income offset in the agreement, where it is appropriate.In the first year the LLC spent $250,000 on R&D. The second year, the LLC spent $100,000 on R&D. In the third year the product was patented and sold for $800,000.

1. Assume that Money and Brains agree to allocate all income and losses equally,each member has a deficit restoration requirement. What is the taxable income for each member for each of the three years?

Reference no: EM131315911

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