Frank and Bob are equal members in Soxy Socks, LLC. When forming the LLC, Frank contributed $57,000 in cash and $57,000 worth of equipment. Frank's adjusted basis in the equipment was $42,000. Bob contributed $57,000 in cash and $57,000 worth of land. Bob's adjusted basis in the land was $23,000. On 3/15/X4, Soxy Socks sells the land Bob contributed for $65,000. How much gain (loss) related to this transaction will Bob report on his X4 return

The gain (loss) related to this transaction will Bob report on his X4 return is $38,000

Explanation:

Solution

Given that

The value of land = 57,000

Less: Bob's Adjusted Basis in the land is = - $23,000

The Built in Gain allocated to BOB = $34,000

Now,

The consideration in sales = $65,000

Less: Land Value is = - 57000

Both members gain to be allocated = 8000

Hence,

The Total Gain Allocated to BOB is = 34000 + (8000*50%) =

34000 = 4000

= 38,000

Note: The original $34000 of built-in gain on the contributed land must be given to the contributing partner which is Bob.

The remaining $8000 of gain must be shared equally between Bob and Frank.

So, Bob will report $38000 gain ($34,000 + (50% * $8,000)) from this transaction on his returns