How Much Gain Lola Recognizes from the Distribution?

What is the amount that Lola recognizes from the distribution made by Lenax LLC?

The answer is Lola should recognize a $3,000 gain from this distribution.

Explanation:

From the question given, we can determine the gain Lola recognizes from the distribution as follows: After accounting for the calendar year LLC’s 2016 operations, Lola owns a one-half interest in Lenax LLC with a basis of $22,000 on December 31, 2016. At that date, Lenax LLC makes a cash distribution of $25,000 to Lola in a proportionate nonliquidating distribution. To calculate the gain Lola recognizes from this distribution, we need to consider the following: - Cash Distributed: $25,000 - Basis in Ownership Interest: $22,000 The gain Lola recognizes can be calculated as follows: Gain = Cash Distributed - Basis Gain = $25,000 - $22,000 Gain = $3,000 Therefore, Lola should recognize a $3,000 gain from this distribution. After the distribution, Lola's basis in the ownership interest becomes zero. This gain is taxable to Lola and should be reported in accordance with tax regulations. In conclusion, the distribution made by Lenax LLC results in Lola recognizing a $3,000 gain, which should be acknowledged in her tax filings.
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