Reference no: EM132919122

Three individuals want to start a catering company and to operate it as an LLC, which will receive partnership tax treatment as the default for tax purposes. Chen contributes a van for transporting the food with a fair market value of $32,000 and an adjusted tax basis of $29,000 for 25 percent profits and capital interest. Bo contributes a bakery shop with a fair market value of $230,000 and an adjusted tax basis of $175,000 for 50 percent profits and capital interest. Jing contributes $60,000 in cash for 25 percent profits and capital interest. The LLC does not have any debt (either from the partners or that it takes on directly from a bank). Chen owned and contributed had a $10,000 car loan on it that used the van as collateral (where the creditor could not come after Chen or any of the other partners beyond the collateral or profits in the business).

Problem a) Chen's outside tax basis in the LLC in this updated setting is