The LLC agreements states that profits and losses will be shared equally among the partners. V and D devote full time on LLC, so partners agree tat V and D receive a guaranteed payment from LLC of 40,000 each.
In the first year, LLC reports a loss of 60,000 as follow:
Gross sales 500,000
Interest income 3,000
Long term gain from sale of equipment 12,000
Business expenses (495,000)
Guaranteed payments (80,000)
Net loss 60,000
In addition, cash of 20,000 was distributed to each partner. LLC borrowed another $30,000 in its line of credit, making its total borrowings 105,000
How would these affect the taxable income for each partner? What's each parter's tax basis at the end of year 1?