Tom is talking to his friend Bob, who has an interest in Freedom, LLC, about purchasing his LLC interest. Bob's outside basis in Freedom, LLC is $10,000. This includes his$2,500 one-fourth share of the LLC's debt. Bob's 704(b) capital account is $17,000. If Tom bought Bob's LLC interest for $17,000, what would Tom's outside basis be in Freedom, LLC?
A) $10,000.
B) $19,500.
C) $14,500.
D) $17,000.

Question

Quizplus · Accepted Answer

Tom's outside basis would be the amount he paid for the LLC interest, which is $17,000. However, he would also take over Bob's outside basis, which includes his share of the LLC's debt, so Tom's new outside basis would be $17,000 + $2,500 = $19,500.

Tom Is Talking to His Friend Bob, Who Has an Interest