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.

---

Definitions:

QuickBooks Pro

A version of QuickBooks accounting software designed for small to medium-sized businesses, offering advanced features.

Memorize Check

A feature in financial software that allows users to save the details of a written check for future reference or replication.

Automate

The use of technology to perform tasks with minimal human intervention.

Overdraw

Occurs when an account's balance goes below zero because more money has been withdrawn from the account than was available.