In X1, Adam and Jason Formed ABC, LLC, a Car

question 80

Multiple Choice

In X1, Adam and Jason formed ABC, LLC, a car dealership in Kansas City. In X2, Adam and Jason realized they needed an advertising expert to assist in their business. Thus, the two members offered Cory, a marketing expert, a 1/3 capital interest in their partnership for contributing his expert services. Cory agreed to this arrangement and received his capital interest in X2. If the value of the LLC's capital equals $180,000 when Cory receives his 1/3 capital interest, which of the following tax consequences does not occur in X2?

• A) Cory reports $60,000 of ordinary income in X2.
• B) Adam, Jason and Cory receive an ordinary deduction of $20,000 in X2.
• C) Adam and Jason receive an ordinary deduction of $30,000 in X2.
• D) Cory reports $60,000 of ordinary income in X2, and Adam and Jason receive an ordinary deduction of $30,000 in X2.

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Definitions:

Emerson

Ralph Waldo Emerson, a 19th-century American essayist, lecturer, philosopher, and poet who led the transcendentalist movement.

American Mind

A concept referring to the collective mindset, attitudes, or cultural ethos predominant among the people of the United States.

Evangelical

A movement within Protestant Christianity emphasizing the importance of the conversion experience, the authority of the Bible, and spreading the Christian faith.

Transcendentalism

A philosophical and literary movement in the 19th century U.S. that advocated for personal intuition, self-reliance, and a closer relationship to nature.