In a proportionate nonliquidating distribution of his 30% interest in the MNO LLC, Neil received cash ($60,000), land (basis of $40,000 and value of $75,000), and unrealized receivables (basis of $0 and value of $22,000). In addition, Neil is relieved of his $40,000 share of the LLC's liabilities. Neil's basis in MNO (including his share of LLC liabilities) was $80,000 immediately prior to this
distribution.
a. How much gain or loss does Neil recognize on this distribution?
b. What is Neil's basis in the receivables and land he receives in the distribution?
c. What is Neil's basis in the LLC interest following the distribution?
a. Neil recognizes a gain of $20,000 . He received a cash distribution of $100,000 (including his relief of liabilities), against his basis of $80,000.
b. Neil has a carryover/substituted basis in the unrealized receivables of $0 . He also has a $0 basis in the land.
c. Neil's basis in the LLC interest is $0 following the distribution.
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