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Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Keeping a separate basis calculation for tax basis in an LLC,

Resolved Question:

Keeping a separate basis calculation for tax basis in an LLC, we have more than one member that has pledged an unlimited (jointly and severably) personal guarantee on the same loan, and other members that have no guarantees. Do we increase each recourse member's tax basis by 100% of the loan, and then reduce all when the loan is paid off, or in the event of a liquidation where the bank doesn't pursue one or all members? Or, do we split it up as if it was limited recourse? Since our operating agreement dictates that the share of loses is allocated based on positive basis, we want to make sure that the recourse members get their fair share of loss.
Submitted: 7 years ago.
Category: Tax
Expert:  Lev replied 7 years ago.

Giving personal guarantee by the member - will not change that member's basis in the LLC because there is no cost basis in the personal guarantee.


You may however agree that member will receive different share of distribution to award his/her risk involved into giving the personal guarantee.


You may do so if it is not allowed by the operating agreement, or you may amend the operating agreement if all members agree.


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