Calculating Capital Gain on Sale of LLC Interest

Explanation:

Capital Gain Calculation:

Capital gain on sale = Sales of interest by Yong - Basis of Yong in the LLC interest

Sales of interest by Yong: $17,500

Less Basis of Yong in the LLC interest: $11,000

Gain: $6,500

Therefore, Yong recognized a capital gain of $6,500 because he sold his 10% interest in Catawissa LLC to Mei for $17,500. His basis in the LLC interest was $11,000, resulting in a capital gain of $6,500.