Paul Is a 25% Owner in the DDBP LLC (A

Multiple Choice

Paul is a 25% owner in the DDBP LLC (a calendar year entity) .At the end of the last tax year,Paul's basis in his interest was $40,000,including his $10,000 share of LLC liabilities.On July 1 of the current tax year,Paul sells his LLC interest to Lee Anna for $50,000 cash.In addition,Lee Anna assumes Paul's share of LLC liabilities,which,at that date,was $15,000.During the current tax year,DDBP's taxable income is $100,000 (earned evenly during the year) .Paul's share of the LLC's unrealized receivables is valued at $5,000 ($0 basis) .At the sale date,what is Paul's basis in his LLC interest,how much gain or loss must he recognize,and what is the character of the gain or loss?

A) $65,000 basis;no gain or loss.
B) $65,000 basis;$15,000 capital gain.
C) $57,500 basis;$2,500 ordinary income and $5,000 capital loss.
D) $57,500 basis;$5,000 ordinary income and $2,500 capital gain.
E) $55,000 basis;$5,000 capital loss.