J&J,LLC Was in Its Third Year of Operations When J&J $\quad$

question 54

Essay

J&J,LLC was in its third year of operations when J&J decided to expand the number of members from two,A & 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 1/3 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 1/3 profit interest,what would be the tax consequences to members A,B,and C,and to J&J?
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { J\&J Limited Liability Company }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Balance Sheet }$

$\begin{array}{l}\begin{array}{lll}&\text { Basis}& \text { FMV }\\\text { Cash } & 20,000 & 20,000 \\\text { Inventory } & 5,000 & 5,000 \\\text { Equipment } & 10,000 & 17,000 \\\text { Building } & 30,000 & 45,000 \\& & \\\text { Total Assets } & 65,000 & 87,000\end{array}\begin{array}{lll}&\text { Basis}& \text { FMV }\\\text { Account Payable } & 7,000& 7,000 \\\text { Mortgage Payable } & 20,000 & 20,000 \\\\\text { A - Capital } & 22,000 & 30,000 \\\text { B - Capital } & 16,000& 30,000 \\\text { Total Liab. \& OE } & 65,000& 87,000\end{array}\end{array}$

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