J&J, LLC, was in its third year of operations when J&J decided to expand the number of members from two, A and B, with equal profits and capital interests, to three members, A, B, and C. The third member, C, will contribute her financial expertise to the LLC in exchange for a one-third capital interest in J&J. Given the balance sheet below reflecting the financial position of J&J on the date member C is admitted, what are the tax consequences to members A, B, and C, and to J&J, when C receives her capital interest? If, instead, member C receives a one-third profits interest, what would be the tax consequences to members A, B, and C, and to J&J?
Definitions:
Psychodynamic Theories
A framework in psychology that emphasizes the role of unconscious processes and childhood experiences in shaping personality and behavior.
Trait Theories
The study of human personality focused on identifying and measuring the stable characteristics that distinguish one individual from another.
Reciprocal Determinism
A concept in psychology that suggests an individual's behavior is both influenced by and influences their personal factors and the environment in a cyclical manner.
Spotlight Effect
The perception that people are paying more attention to one's appearance and behavior than they really are.
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