2.99 See Answer

Question: Skylar is ready to retire and \Va


Skylar is ready to retire and \Va nts your professional opinion on the most advantageous way to dispose of a 400A. interest in STU LLC.
Option # l. Skylar will immediately sell the LLC interest to Partner Tameeka for $300,000 cash. Skylar will then invest the after-tax proceeds in a municipal bond paying 4% interest per year, compounded at the end of each year. (Assume there are no Federal or state incon1e taxes on the interest earned on the bond.)
Option #2. STU will distribute a parcel of land (investment property) to Skylar in complete redemption of the 400/o interest. STU's land was recently appraised for $260,000. The appraiser estimated tl1at Skylar could sell tl1e land for $400,000 (before taxes) at the end of eight years. For simplicity, detern1ine the tax results of the land distribution under the proportionate liquidating distribution rules. [In this case, this result also arises if the distribution is a § 736(b) distribution.)
Other information. In either scenario, at the end of the eighth year, Skylar will convert the asset (bond or land) to cash to help cover living expenses. If needed, use the Present and Future Value Tables in Appendix F.
Assumptions:
• STU owns no hot assets and no stated or unstated goodwill.
• Skylar's basis in the LLC interest is $100,000.
• The LLC's basis in the land is $80,000.
• Skylar's tax rate is 200A. on capital gains.
Draft a memo to Skylar describing how each option would be treated for tax purposes, and the after-tax amount of cash Skylar would have on hand after cashing the bond or selling the land at the end of year 8. Based solely on this analysis, recommend one of these options to Skylar.


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> On December 31, 2017, Alpha Corporation, valued at $10 million, acquired BetaCo when BetaCo was valued at $5 n1illion. BetaCo holds a capital loss carryforward of $220,000 and excess business credits of $435,000. At the end of 2018, Alpha reports taxable

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> Assume the same facts as in Problem 56. Assume that Burgundy, Inc.'s annual guaranteed payment is increased to $120,000 starting on January 1, 2019, and the LLC's taxable income for 2018 and 2019 (after deducting Burgundy's guaranteed payment) is the sam

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> Paula's basis in her partnership interest is $60,000. In liquidation of her Decision Making interest, the partnership makes a proportionate distribution to Paula of $20,000 of cash and inventory (basis of $5,000 and value of $7,000). No •·other property"

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> Provide the information required to complete the following chart.

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> What tax consequences result from the death of a partner? What collateral issues might arise?

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2.99

See Answer