During the Current Tax Year,Marci and Rachel Each Contributed $25,000

Multiple Choice

During the current tax year,Marci and Rachel each contributed $25,000 to form the M&R LLC.Each member has a 50% interest in LLC capital,profits,and losses,except that depreciation expense is allocated 25% to Marci and 75% to Rachel.During the first year,the LLC reported income (before depreciation expense) of $10,000 and had depreciation expense of $4,000.The LLC incurred recourse debt of $40,000.Under the constructive liquidation scenario,how is the recourse debt allocated to Marci and Rachel?

A) All recourse debt is allocated to Rachel because she has the highest percentage allocation of depreciation expense.
B) The recourse debt is shared equally ($20,000 each) by Rachel and Marci.
C) The recourse debt is allocated $30,000 to Rachel and $10,000 to Marci.
D) The recourse debt is allocated $21,000 to Rachel and $19,000 to Marci.
E) The recourse debt is not allocated to the LLC members.