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Determine Partnership Basis And Capital Accounts Practice Test
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Q1
EF LLC (taxed as a partnership) has two equal partners, E and F. On January 1, E contributes $30,000 cash and F contributes services with an agreed value of $30,000 in exchange for a 50% capital and profits interest. Capital accounts are maintained under Treasury Regulations §1.704-1(b)(2)(iv), and the LLC has no liabilities. Which item affects F's capital account but not F's outside basis at formation under Internal Revenue Code §722?
EF LLC (taxed as a partnership) has two equal partners, E and F. On January 1, E contributes $30,000 cash and F contributes services with an agreed value of $30,000 in exchange for a 50% capital and profits interest. Capital accounts are maintained under Treasury Regulations §1.704-1(b)(2)(iv), and the LLC has no liabilities. Which item affects F's capital account but not F's outside basis at formation under Internal Revenue Code §722?