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

question 87

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?
$$\begin{array}{l}\text { Presidential Suites Partnership }\\\begin{array} { | l | c | c | c | } \hline & \text { Year-End } & \text { Profits } & \text { Capital } \\\hline \text { Lincoln, Inc. } & 3 / 31 & 35 \% & 30 \% \\\hline \text { Washington, Inc. } & 7 / 31 & 30 \% & 40 \% \\\hline \text { Blaster, Inc } & 11 / 30 & 35 \% & 30 \% \\\hline\end{array}\end{array}$$

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Definitions:

Death Instincts

The unconscious drive toward decay, destruction, and aggression.

Preconscious

Pertains to thoughts and feelings not immediately in conscious awareness but can be readily brought to consciousness.

Personality Structure

The organization and dynamics of individual personality components, including traits, attitudes, and behaviors that define a person's unique personality.

Psychoanalysis

Sigmund Freud’s theory of personality and system of therapy for treating mental disorders.